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Overall bonuses of FTSE 100 directors still not linked to company performance

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Freezing salaries and slimming bonuses for FTSE 100 directors shows reaction to the changing economic environment, but there is still room for improvement, new research shows.

A report from Hewitt New Bridge Street surveyed remuneration packages of FTSE 100 directors and found 60% of companies have frozen salaries over the past year and bonuses have been reduced to 90% of salary, compared with 110% of salary in 2008.

The median salary of the highest-paid FTSE 100 directors is £800,000, rising to £1 million in the FTSE 20. And in the typical FTSE 100 director's package variable pay accounts for 60% of remuneration, compared with only 45% in 2003.

But although bonus payments were lower than previous years, the survey found companies have continued to pay over half of the maximum potential amount during a period when nearly all FTSE 100 companies saw their share price fall. This raises the question of whether bonus schemes are still linking pay and performance appropriately.

David Tankel, principal consultant at Hewitt New Bridge Street, said: "While the recession has had its impact on bonus payments, which fell from 2008 levels, bonuses remain relatively high. While there have been variations, with the figure for companies with a March 2009 year-end - and therefore including more of the downturn than companies that reported earlier - standing at 50% of salary rather then 70% of companies with a December year-end, overall bonus payments are higher than many would have expected."