Majority of directors have experienced a pay cut

The majority of private sector directors received a pay cut in real terms in 2010, according to a survey by the Institute of Directors (IOD).

Its annual Directors Rewards survey found nearly half (46%) of directors have had either a pay freeze or a pay reduction in cash terms in 2010.

The survey results contrast with last week’s Incomes Data Services (IDS) survey, which showed some FTSE 100 directors have received large remuneration rises this year.

For the 54% who received a pay rise this year, the average increase was 2.5% – a real terms cut once inflation is taken into account.

The average basic pay of a managing director in a small company (turnover up to £5 million a year) was £70,000; in a medium company (turnover up to £50 million) it was £100,000; and £128,000 in a large company with turnover up to £500 million.

However, pay reductions for directors are not being offset by better bonuses, which remain small.

Almost a quarter (23%) of directors reported their bonus was cancelled or postponed this year; where they were awarded, the average was down on last year by nearly 20%.

The average bonus for a director in a small company was £10,000; in a medium company it was £12,600 and £17,200 in a large company.

Miles Templeman, director general of the IOD, said: “This survey kills the idea company directors are beginning to enjoy big pay rises at the very moment a pay freeze takes effect in the public sector.

“For the second consecutive year, most directors are seeing their basic pay and bonuses go down. Clearly, the impact of the recession on director remuneration is still being felt.

“When politicians and other individuals attack the private sector for excessive pay they ignore the fact the majority of private sector directors earn about the same as a school head teacher or an ordinary NHS GP.”

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