Bonuses drive executive pay rises

Top executives in the UK and most other European countries received below-inflation salary increases, but higher bonuses this year.

In the UK, base salaries climbed 0.9 per cent, while inflation rose 2.8 per cent over the same period, according to research from consultancy firm Hays Group.

However, when bonuses are taken into account, total remuneration surged ahead 14 per cent in the UK, comfortably beating beating rises in the cost of living.

Simon Garrett, a director with Hay Group, says, ‘The changes to bonuses that we are seeing seem to be driven by the understandable fear that an unobtainable bonus would not motivate executives. As a result many companies revised their short-term incentive performance targets downwards to reflect the difficult market conditions.’

The median increase in executives’ base salaries for the entire EU was 0.2 per cent, compared to inflation of 1.4 per cent, while total remuneration including bonuses rose 6 per cent Europe-wide.

In the UK, almost half of a CEO’s compensation is made up of long-term incentives such as share options, with less than a quarter coming from base salaries and the remainder from bonuses.

>Directors’ Pay on AIM, a research report from our sister title Growth Company Investor, provides detailed information on the base salaries and bonuses of CEOs, FDs and boards of UK small cap companies.

Nick Britton

Nick Britton

Nick was the Managing Editor for when it was owned by Vitesse Media, before moving on to become Head of Investment Group and Editor at What Investment and thence to Head of Intermediary...

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