* Stellar executive pay in focus as economy stalls
* U.S. wage disparity four times that in Sweden
* S&P 500, FTSE 100 CEO pay up by third in 2010
By Ben Hirschler and Scott Barber
LONDON, Aug 4 A stuttering economy and anaemic
profit growth means company bosses' pay is unlikely to rise as
fast this year as in 2010, but complaints from politicians and
disgruntled shareholders over executive rewards are not going
If anything, the heat is increasing.
Britain, a traditional leader in corporate governance, is
weighing new ways to rein in excessive salaries and bonuses;
European and U.S. officials are aiming for more disclosure; and
Australia has just passed tough new rules that could force board
In the good times, the man or woman in the street may not
think too much about chief executives' pay packets. Today, faced
with an extended squeeze on real living standards, things feel
Not surprisingly, the gap between the top and bottom on pay
is biggest in the United States, where average CEO remuneration
is 142 times that of employees, according to Thomson Reuters
ASSET4 data. British CEOs pull in 69 times more than their
workforces while egalitarian Sweden has an average differential
of only 34 times.
After the hiatus of the recession, the gap between the
boardroom and the shop floor is yawning wider.
"At a time of austerity, it does stand out as being
particularly egregious," said Deborah Hargreaves, chair of
Britain's independent High Pay Commission (HPC), set up by
left-of-centre pressure group Compass with backing from the
Joseph Rowntree Charitable Trust.
If current trends continue, by 2030 wage disparity will
reach levels of inequality not seen since Victorian times, her
Perceived excesses, particularly in the banking sector,
chime with politicians who are all too aware of simmering voter
anger on the issue. The numbers certainly don't look good.
Median compensation for CEOs at S&P 500 companies increased
by 33 percent in 2010, according to International Shareholder
Services, which advises investors on corporate governance.
In Britain, pay for leaders of FTSE 100 companies was up 32
percent, while workers' pay increased just 2 percent, figures
from pay consultancy MM&K and corporate governance group
And while this year's pay increases may be lower, many CEOs
still stand to benefit from share options granted in the depths
of the downturn when stock prices were far lower.
Companies argue that pay policies are more tightly tied to
performance than ever, but dissident shareholders -- still a
minority -- are growing frustrated.
"This isn't just about shareholders letting off a bit of
steam. This is about shareholders having serious concerns about
the linkage between strategy and stratospheric pay," said Sarah
Wilson, chief executive of Manifest.
In the United States, the Dodd-Frank corporate governance
legislation -- which has this year brought "say-on-pay" votes to
annual meetings -- is set to require firms to disclose the ratio
of the CEO's pay to that of the median of workers.
A simple ratio, however, can be a blunt instrument.
Goldman Sachs , for example, emerges as the U.S.
corporation with the flattest pay structure in the Thomson
Reuters dataset, reflecting the fact it has thousands of high
earners on its payroll. The investment bank typically
distributes around 40 percent of its revenue in employee pay.
The biggest differentials -- more than a thousandfold -- are
to be found at KFC parent Yum Brands and McDonald's
, with their vast armies of low-paid chicken fryers and
In Europe, such huge differentials are less common, but the
trend varies across the continent. British supermarket chain
Tesco has a salary gap twice as large as that of German
rival Metro .
Germany's two-tier management structure, with supervisory
boards that include worker representatives overseeing the
executive board, is a clear force for pay restraint.
"The workers keep things in check," said a management pay
consultant who declined to be identified.
British business minister Vince Cable -- who has a fresh
spring in his step after emerging as a rare winner in the News
Corp scandal -- has lashed out at the "ridiculous
levels of remuneration" for company bosses and aims to take a
targeted approach in a planned consultation process on changes
to reporting standards.
At a meeting last week, he was urged by HPC to consider
requiring companies to disclose how much of revenue goes to pay
executives compared with dividend payouts, capital investment
and total remuneration.
The rest of Europe is further behind. Still, the European
Commission in April produced a discussion document on corporate
governance asking if disclosure of boardroom pay and
remuneration policy should be mandatory, and put to a vote by
In Australia, a new "two strikes" rule implemented this
month gives shareholders the right to replace a board if a
quarter of votes oppose a company's remuneration report in two
To date, shareholder action on executive pay has been
limited. The first "say-on-pay" season in the United States,
giving shareholders an advisory say on executive pay, has seen
less than 2 percent of companies lose their votes.
But around one in six companies did get less than 80 percent
shareholder support, according to a survey last week by
consultancy Towers Watson, and those companies are now being
forced to take the issue seriously.
In Britain, where voting on the remuneration report has been
in place since 2003, the average level of dissent in shareholder
votes at this year's AGMs was 9.5 percent, according to
Ironically, increased pay transparency may be a double-edged
sword as boards jockey to benchmark against the competition.
"Boards seem to think it is a dereliction of duty or an
admission that their chief executive isn't quite up to it if
they're not being paid in the top quartile -- but that just
leads to an ever increasing ratchet up," said HPC's Hargreaves.
(Additional reporting by Marilyn Gerlach in Frankfurt; Editing
by Andrew Callus)