Pay for British and American bosses rises

SALARY       EXECUTIVE PAY       TAX       BONUS       INCREMENT

Global – Despite falling share prices, directors in Britain are seeing a bonus increment of up to 187% over the past decade, while American bosses are earning more than what they pay in tax.

Bloomberg reported salaries of British directors have risen 64% over the past 10 years even though the average year-end share price of FTSE 100 companies dropped 71%. FTSE is a joint venture between the Financial Times and the London Stock Exchange.

According to the High Pay Commission in the UK, bosses of Britain’s top 100 companies saw their compensation packages leap by an average of ₤1.3 million (S$2.5m) to almost ₤4.5 million (S$8.8m) last year, the Guardian reported.

Furthermore, the average pay deal for a FTSE 100 chief executive officers (CEOs) rose from ₤3.09 million (S$6m) to ₤4.45 (S$8.7) million last year, a result of share-based incentive schemes and a sharp bounce in the market.

Deborah Hargreaves, the head of the pay commission which conducted the report, said this dispels the myth that bigger bonuses and high pay equal better company performance. “There has been a massive growth in what has been termed as performance-related pay, yet no such corresponding leap forward in company performance,” she said.

Economists have suggested that the rise in shares value between late 2009 and 2010 had little to do with the performance of businesses. Rather, they argue it is the result of policies set by global central banks to drive down long-term interest rates to avoid another financial depression.

The report follows findings from the Institute of Policy Studies, which showed the salaries of a quarter of CEOs in the US have surpassed their companies’ federal income tax expenses.

The Independent reported companies such as Boeing, eBay, Verizon, and Bank of New York Mellon gave their bosses a bigger paycheque while taking advantage of several policies to make millions in tax credit claims. For example, the bank paid its top executive US$19.4 million (S$23.5m) last year while securing US$670 million (S$810m) in tax benefits. 

In the US, tax benefits offered to corporations can be considered as a refund or a means to write-off future earnings. The study showed “ample evidence” that CEOs are “expending considerably more energy on avoiding taxes than perhaps ever before”.

However, organisations identified in the report have defended themselves. They claim companies can “negotiate tax refunds for one year on condition that they pay what they would have owed in future years”.

It would also be fair to note that financial data in the report was taken from the organisations' regulatory filings, and those figures can differ from actual tax returns.

Much of the US is already in debate over wealth inequality and whether corporate tax rates in the States are too high.

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