Business

Seven-figure salaries damage UK firms' reputation, poll suggests

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Public anger over the size of top executives' salaries is damaging the reputation of UK firms, according to a survey of business leaders.

In a poll of more than 1,000 members of the Institute of Directors (IoD), 52% said excessive pay packets were eroding people's trust in big companies.

More than half of those surveyed also agreed performance-related pay should be deferred by up to three years.

The poll was carried out on behalf of the High Pay Centre think tank.

The High Pay Centre was formed following a report by the High Pay Commission in 2011, which argued that the high salaries of UK executives were "corrosive".

The commission, set up by a pressure group, said the disparity between what top executives and average workers earn had been growing for 30 years.

In 2013, new rules were introduced, forcing listed firms to give shareholders a binding vote on directors' pay.

A firm's remuneration policy now requires the approval of more than 50% of shareholders for a policy to pass.

However, the seven-figure pay cheques awarded to British business bosses have continued to make the headlines in recent months.

In November, the IoD denounced a proposed £25m pay package for the new head of oil and gas giant BG Group, Helge Lund, as "excessive" and "inflammatory", while shareholders in the firm threatened a revolt.

Governance 'failure'

Meanwhile, the salaries awarded to the chief executives of Britain's biggest banks have drawn public anger.

Last week, HSBC revealed that its boss, Stuart Gulliver, was paid £7.6m in 2014, while chairman Douglas Flint's total pay increased to £2.5m.

Antonio Horta-Osorio, the chief executive of Lloyds, which was bailed out by the government at the height of the financial crisis, is set to receive a total remuneration package of £11m.

And the boss of Royal Bank of Scotland - another bailout recipient - announced last week that he would not receive a bonus after the firm reported a loss of £3.5bn for 2014, although his pay could still total almost £3m.

The director of the High Pay Centre, Deborah Hargreaves, said the think tank's findings showed that "outside the boardrooms of big corporations, ordinary small and medium-sized business owners are as appalled by the culture of top pay as anybody else".

"When big business leaders rake in seven or eight-figure pay packages every year, including massive bonuses regardless of company performance, we are clearly seeing a corporate governance failure, rather than a fair and functional free market.

"Ordinary workers, customers and wider society, not to mention shareholders, are being ripped off."

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