LTIP payments to FTSE 350 directors have increased by over 250% between 2000 and 2013, roughly five times as fast as returns to shareholders.

A committee drawn from business, academia and the media conducted the research over 12-month period, and members included Institute of Directors (IoD) director-general, Simon Walker, and former fund manager, David Pitt-Watson.

However, the committee warns that there is little evidence that performance-related pay induces better performance from executives. It claims that targets based on company profits or share price can create perverse incentives that are damaging to businesses and the wider economy in the long-term.

This year has seen significant shareholder votes against executive pay at companies including Ladbrokes, Centrica and BG Group.

Deborah Hargreaves, director of the High Pay Centre, said: ‘Performance-related pay has failed on its own terms. It doesn’t encourage or reward good business performance. The only effect it has is to make executive pay packages more complex, less aligned with the interests of the company and much, much bigger.’

The report also argues that annual bonus payments should be made in cash, not shares, to prevent executives from benefiting from sudden increases in the share price caused by external factors such as a takeover bid.

It says so-called ‘golden hello’ payments to entice external executives should not be offered unless the position has been advertised as part of an open recruitment process, and wants to see remuneration committees adopt a more diversified membership, to ensure they reflect a wider range of professional backgrounds.

The report, No routine riches: reforms to perfomance-related pay, is available here