L-tips increase FTSE-100 directors’ reward

Basic pay and bonus growth for FTSE-100 directors has slowed over the past year, but the value of vested long-term incentive plans (L-tips) has pushed their average earnings increase to 27%, according to research by Incomes Data Services (IDS).

Its Directors pay report 2012/13 found that salary rises for FTSE-100 directors increased by a median of 3.5%, although the value of bonus payments received has declined by 4.9%.

Across all FTSE-100 directors, the value of L-tips rose by 81%, from a median of £519,625 in 2011 to £938,888 in 2012. For chief executives, the value of vested L-tips reached a median of £1.6 million.

L-tips, which are designed to incentivise directors over a long-term period, are now used by more than 90% of the FTSE 100. These are typically granted in the form of shares and are closely linked to shareholder returns.

Steve Tatton, editor of the report, said: “Whether a reaction to government pressure, shareholder concerns or a worse-than-expected business environment, it seems the brakes have been applied to the basic pay growth for FTSE-100 bosses.

“However, while shareholders will be pleased to see more traditional elements of pay seemingly slowing, these figures show that directors’ earnings can still grow significantly as a result of a mix of incentives.”