Board pay rises at three times rate of workers

Pay rises for directors have outstripped wage increases for their workers by 3:1 over the past seven years, according to a survey published today.

The widening gap between the boardroom and the rest of the workforce is highlighted in a consultation document produced by the TUC in response to the government's review of executive remuneration.

The TUC says the gap is unfair and inefficient and breeding resentment and low morale - and it wants new measures to encourage restraint. General secretary John Monks says: "This isn't the politics of envy, just a drive for openness based on what makes good business sense."

According to the survey - which excludes the substantial extra rewards that directors are able to generate from long-term incentives and share options - the median annual salary and bonus for the highest-paid director grew from £201,000 in 1994 to £416,073 in 2001, an increase of 107% over the seven-year period.

The median of average employee pay in the same companies rose from £19,272 in 1994 to £25,223 over the same period, an increase of just 31%.

The TUC survey covered 456 companies drawn from the FTSE 100, the mid-250 and the Small Cap indices, and mirrors the findings of an earlier TUC survey. In the years 1985-1995, executive pay also outstripped employee pay by 3:1.

In the research findings, the TUC insists that the message inflated executive pay is sending to employees is that the value of the workers' contribution to a company's success is declining.

"It is redolent of 'there's one rule for us and one rule for them', which should have no place in the modern workplace", it says.

The TUC adds: "It is a sad irony that in an era where unions and employers have worked together to reduce blue-collar, white-collar distinctions, the division between directors and their employees is widening."

The government's draft regulations on executive pay in clude a proposed shareholders' vote on directors' pay, but the TUC wants a series of new measures to be included in companies' annual reports that could force remuneration committees to think twice before awarding directors even more cash. They are:

· for each director, the rate of increase in their basic salary for each of the last three years;

· the average pay increase for staff elsewhere in the company for each of the last three years;

· the distribution of pay throughout the company as a whole - on an hourly pay basis;

· where the average rise for directors is significantly higher than the average rise for employees, an explanation for this differential from the remuneration committee;

· the type of pension scheme - final salary or money purchase - offered to directors and the type of scheme offered to staff, and where these are not the same, an explanation should be given;

· the contribution rate for directors and for employees, and an explanation to be given where they differ;

· for final salary schemes, the accrual rate for directors and for employees, with an explanation where they differ;

· a statement of other retirement benefits, in addition to their pension payments, that directors will receive on leaving the company.