18-21-directors-pay.qxp 14/12/09 14:29 Page 19
~FINANCE~
B
ankers may be nonplussed by the Deloitte, provides unique data on the greater judgement than usual when setting
public opprobrium at their financial remuneration packages of executives on the a balance between fixed and variable
excesses, but the bottom line is that London Stock Exchange’s junior market. elements of remuneration, making it possible
nobody should be rewarded for failure. Significantly, it shows that almost 16 per cent to motivate and attract suitable managers
Mark Adorian, head of the remuneration of AIM companies poured over £1 million while remaining appropriate to the size,
committee of AIM-listed StatPro, is into their boards’ pockets during a period profitability and potential of the company.
unimpressed by businesses that perpetuate when the total market capitalisation of AIM ‘Newer companies that come to AIM to
a culture of avarice, especially at publicly raise cash need to preserve money with a
listed entities. ‘It’s a terrible situation that lower basic salary, and without regular cash
companies making losses are paying huge
‘Newer companies that come
flow they need to include a higher level of
amounts to their directors,’ he says, adding performance-related pay,’ points out Nigel
that it’s not only the executives who should
to AIM to raise cash need to
Rogers of electronic manufacturing services
be admonished. ‘It reflects sadly on the
preserve money with a
provider Stadium, whose management took a
inactivity of shareholders in this country.’
lower basic salary’
20 per cent pay cut from April to July this
As many companies freeze or reduce year (their salaried staff also agreed to a 10
salaries, others persist in defying per cent reduction).
recessionary gravity. Paul Fineman, CEO of Rogers believes the tough times of late
International Greetings, a manufacturer of fell from a peak of £99 billion to £39 billion. may cause a rethink of how salaries are
wrapping paper and greetings cards, states, However, AIM executives don’t claim to be set at smaller companies. ‘I think we’ll
‘It’s a different world, and I can’t relate to doing “God’s work” and many are now see an increasingly high proportion of
such a culture. And if I nail my colours to having to work harder for their money. There performance-related pay from here on
the mast, I can’t respect it either.’ were some areas of pay where restraint was at the expense of basic salaries. I think
shown, most notably in the percentage of salaries might be held back a bit and you’ll
OWN GOALS AIM chiefs taking home the largest amounts. see more of that in the future.’
Adorian compares it to the fantasy world of In fact, the percentage of those being paid
footballers. ‘At smaller companies and those more than £500,000 fell from 9.6 per cent to THE COST OF FAILURE
that are not doing as well, I feel that setting 6.9 per cent, while the share of those earning Nevertheless, there is a significant difference
salaries is a bit like the situation with over £1 million fell from 2.7 per cent to just in pay between directors at profitable and
Premiership football teams, where the 80 per 0.6 per cent. Still, the overall trend shows pay loss-making companies. The average CEO
cent who are doing less well feel justified in packets getting heavier, not lighter. pay at loss-making
paying what the top companies are paying.’ companies is
Indeed, while some shell-shocked investors SETTING THE BAR
may have wished for company directors to When remuneration committees are
share some of the financial pain of the past calibrating pay packages, they must take
year, the chief executives of the UK’s most account of numerous influences, from
high-profile growth companies actually objective market data to individual corporate
enjoyed a 5 per cent hike in their pay. The performance, experience and responsibilities.
£2.2 million
average pay package of a chief executive on At smaller companies, which are all about
the highest CEO pay
the Alternative Investment Market (AIM) is potential, this task becomes even harder.
now £190,000, which represents a 30 per cent Given the economic climate, some
package on AIM
increase over the past three years. shareholders have been calling for a freeze
Directors’ Pay on AIM 2009, compiled by our on salaries and will certainly expect the level
sister publication, Growth Company Investor,in of bonuses paid to reflect performance.
association with the professional services firm This means there is a need to apply even
BUSINESS XL 19
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