Article first published as Big Firm Bonuses Back to pre-Crisis Level on Technorati.
Bonuses to executive directors are back to pre-crisis level in the U.K. Though pace of increases is slowed, the levels of payment have reached almost pre-crisis level. A business advisory firm Deloitte conducted a survey to find the developments occurred in pays and bonuses after the crisis. The survey revealed that pay increases for the executives might be history for now. The BBC News quoted Stephen Cahill of Deloitte as saying, “Last year we saw a very large number of companies freezing executive salaries, but at the time it was difficult to predict whether this was a one-off. Now it appears that the years of executive salaries increasing at rates far in excess of inflation and the increase in average earnings are, at least for the moment, well and truly over.”
Toppers at Top
The survey found that the average bonuses for executive directors of FTSE 100 companies were equal to 100% of their basic salary for the year. It said the top 30 companies increased the bonuses to their executives by 140%. Coming to mid-sized FTSE 250 companies, one in Seven paid no bonus to their bosses. For the present year also the difference between the trends of bonuses in FTSE 100 and FTSE 250 companies are expected to continue. While for the bosses of FTSE 100 companies, the bonuses are expected to be greater than the last year in the present year; they would be lower for FTSE 250 companies.
Bonus vs. Austerity
While European Countries are burdened with high levels of debts and deficits and their governments are already on the path of aggressive austerity measures and spending cuts, trade unions or giving warning signals that the workers’ pay
and pensions could not be touched. ‘Trade Union Congress’ has warned it is going to resort to joint industrial actions along with other unions, if the government intends to reduce services to workers. They don’t see the austerity measures as temporary to cut the deficit, but as a rollback of welfare-state system, undermining workers’ rights.
Under these circumstances it would be difficult to defend the high levels of bonuses to the executives. The firms, instead, took an alternative path already i.e. raising the salaries to unexpected levels. At present, they seem to be frozen. But, they have already been raised before being frozen. Now they are telling pay freeze is going to be continued in 2010 as well. Deloitte also sees the pay increase faster than inflation is, at least for the moment, history. It didn’t see pay freeze for long term, not even for near and mid-terms.
It seems there are also political overtones over huge bonuses to the bankers in England. The Mayor of London is quoted by BBC News as saying "Those distinguished, intelligent, highly remunerated people have got to understand the political consequences of doing nothing about the huge bonuses they are about to receive." The Mayor may be meant to say if the bankers continued to risk the people’s money it would be difficult for the politicians to defend bankers’ payments. So, in order that the huge bonuses are maintained without hindrance bankers have to deliver what they are required to. Otherwise there would be adverse consequences for the politicians. It is just ‘give and take.’