FTSE 100 finance directors' pay survey - Bonuses boost pay for FTSE 100 finance chiefs

Accountancy's annual survey shows that FTSE 100 FDs have boosted their paypackets by 14% in a year. Liz Fisher looks at how finance fat cats are getting fatter.

The average remuneration of the finance directors of the FTSE 100 has shown a significant increase this year to 660,000 from 579,000, a 14% increase. An overall increase in total remuneration has taken five more finance directors over the 1m barrier.

Most of the increase, though, can be explained not by a rise in base salary but by a rash of performance-related and other bonuses enjoyed by the FDs.

The survey, based on disclosures in the latest available annual reports, suggests that bonuses have become the most significant proportion of overall remuneration, often at least doubling the FD's base salary.

Every established FD in the survey received a bonus of some description during the year and the majority received a bonus of more than 100,000.

The highest bonus by far was the 1.7m paid to Peter Clarke, finance director of Man Group. According to its annual report, the company outperformed its set targets by 18% during the year. By contrast GKN, which also exceeded its targets, by 21%, paid a bonus of 363,000 to its finance director, Nigel Stein.

Seven more FDs received bonuses in cash, shares or options worth more than 500,000: Byron Grote of BP, Nick Rose of Diageo, Fred Watt of the Royal Bank of Scotland, Jonathan Asquith of Schroders, Andrew Higginson of Tesco, Rudy Markham of Unilever and Ken Hydon of Vodafone.

Golden hellos

The survey also showed that FDs moving between companies can expect lucrative 'golden hello' bonuses, usually in order to compensate them for bonuses they would have received at their previous employer. Trevor Reid, who joined Xstrata 18 months ago, received a bonus of $443,000 (287,662) on joining the company and a further annual bonus of $380,000. His contract entitles him to further bonuses of $295,000 in January 2003 and $221,000 in January 2004 as compensation for the bonuses and options he would have received from his previous employer, the Standard Bank Group.

There are some signs that the companies themselves feel the need to justify the payments. BP points out that the base salaries of its directors had increased by less than 10% during the year. Reckitt Benckiser's remuneration report says that the company 'substantially outperformed its peers yet the bonus paid to executive directors has dropped by over a third compared with 2001 when measured as a percentage of salary'. In practice this meant that the bonus for finance director Colin Day fell from 263% to 157% of his salary, or 486,000.

What about the share options?

It is also important to remember that this survey is based on the 'total emoluments' disclosed by the companies in their remuneration reports.

In most cases the emoluments do not include additional share options awarded to the company's executives, which can prove extremely lucrative. An analysis of the shares held by finance directors in the FTSE 100 is beyond the remit of this survey, but evidence suggests that it is a lucrative benefit for many.

According to financial analysts Hemscott, directors of the FTSE 100 sold shares in their own companies worth almost 310m in the eight months to August 2003. The figure marks a significant increase over the same period last year, when 676 trans-actions (compared with 700 this year) worth 251m took place.

Shareholders protest at high pay

The apparent increase in the FDs' bonuses is in line with growing bonuses paid to other executives. According to Bloomberg, the bonuses paid to chief executives in the FTSE 100 increased by 29% during 2002.

But there are signs that shareholders are seeking to reign in the most excessive awards, particularly those for executives who fail to perform well. GlaxoSmithKline, for instance, was forced to withdraw the right for its chief executive Jean-Pierre Garnier to receive more than 17m if he is fired from the post, after pressure from shareholders.

In September, shareholders at Royal & Sun Alliance's agm complained about a retention bonus of 250,000 that the company planned to pay to its finance director, Julian Hance. Hance had announced his intention to resign but will stay with the insurer until spring 2004 in order to smooth the transition.

Directors at Barclays and Abbey National have also been questioned angrily by shareholders at the agm over their pay awards, while HSBC and Shell also had their agms hit by protests. According to executive pay consultants PIRC, 23 FTSE 100 companies failed to gain support from 20% or more of their shareholders for increases in executives' pay in the past financial year. The shareholders' reaction will ensure that pay awards will remain on the government's agenda - trade and industry secretary Patricia Hewitt has described incidence of shareholders voting against executive pay awards as 'entirely justified fury'.

HOW OLD IS THE AVERAGE FTSE 100 FD?

The average age of the finance directors in our survey is 47. The youngest, 36-year-old Nick Luff, is no longer a FTSE 100 finance director. He stood down from the board when P&O Princess Cruises merged with Carnival earlier this year but made a return to P&O as finance director in July. His departure from the FTSE 100 leaves 38-year-old Ian Livingston of BT as the youngest.

  Year end Finance director Institute Age Remuneration total £000s Last year's remuneration Years in post
3i Group 31.03.03 Michael Queen ICAEW 42 435 318 6
Abbey National 31.12.02 Stephen Hester   42 623 n/a 17mon
Alliance & Leicester 31.12.02 David Bennett   40 598 398 3
Alliance UniChem 31.12.02 George Fairweather ICAS 45 331 n/a 18mon
Allied Domecq 31.08.02 Graham Hetherington CIMA 44 747 636 4
Amersham 31.12.02 Giles Kerr ICAEW 44 605 558 6
Amvescap 31.12.02 Robert McCullough AICPA 60 815 1,040 7
Anglo American 31.12.02 Tony Lea   54 663 632 4
Associated British Foods 14.09.02 John Bason ICAEW 45 458 415 4
AstraZeneca* 31.12.02 Jonathan Symonds ICAEW 43 881 778 6
Aviva1 31.12.02 Mike Biggs ICAEW 50 1,004 602 2
BAA 31.03.03 Margaret Ewing ICAEW 48 357 n/a 1
BAE Systems 31.12.02 George Rose CIMA 51 495 535 5
BG Group 31.12.02 Ashley Almanza CA(SA)** 39 232 n/a 1
BHP Billiton* 30.06.02 Charles Goodyear AICPA 45 1,495 917 2
BOC Group 30.09.02 Rene Medori   45 862 685 3
BP 31.12.02 Byron Grote   54 1,247 1,294 1
BT Group 31.03.03 Ian Livingston ICAEW 38 1,116 n/a 1
Barclays 31.12.02 John Varley   47 668 797 3
Boots Group 31.03.03 Howard Dodd ICAEW 43 446 n/a 18mon
Bradford & Bingley 31.12.02 Rosemary Thorne CIMA 51 482 446 3
British American Tobacco2 31.12.02 Paul Rayner ICAEW 48 1,381 n/a 18mon
British Land Co 31.03.03 Graham Roberts ICAEW 44 389 61  
British Sky Broadcasting Group 30.06.02 Martin Stewart ICAEW 39 713 821 5
Bunzl 31.12.02 David Williams ICAEW 57 597 546 12
Cable & Wireless3 31.03.03 David Prince   51 316 n/a 1
Cadbury Schweppes 29.12.02 David Kappler CIMA 55 844 826 8
Centrica4 31.12.02 Phillip Bentley CIMA 44 647 536 3
Compass Group 30.09.02 Andrew Lynch ICAEW 46 825 629 6
Daily Mail & General Trust 29.09.02 Peter Williams ICAEW 50 414 410 12
Diageo 30.06.02 Nick Rose   46 1,259 1,037 4
Dixons Group 03.05.03 Jeremy Darroch ICAEW 40 392 46 18mon
Emap 31.03.03 Gary Hughes ICAEW 41 445 310 3
Exel 31.12.02 John Coghlan ICAEW 44 558 304 2
Foreign & Colonial Investment Trust5 31.12.02 Robert Dowdall   56 n/a n/a 13
Friends Provident 31.12.02 Martin Jackson ICAEW 54 414 365 4
GKN 31.12.02 Nigel Stein ICAS 47 726 160 2
GUS 31.03.03 David Tyler CIMA 50 778 712 6
Gallaher Group 31.12.02 Mark Rolfe ICAEW 44 571 447 3
GlaxoSmithKline 31.12.02 John Coombe ICAEW 57 947 1,326 11
Granada 30.09.02 Henry Staunton ICAEW 55 544 709 10
HBOS 31.12.02 Mike Ellis CIPFA 51 759 801 2
HSBC Holdings* 31.12.02 Douglas Flint ICAS 47 960 848 8
Hanson 31.12.02 Jonathan Nicholls ICAEW 45 574 433 5
Hilton Group 31.12.02 Brian Wallace ICAEW 48 726 741 8
Imperial Chemical Industries 31.12.02 Timothy Scott CIMA 40 563 191 2
Imperial Tobacco Group 28.09.02 Robert Dyrbus ICAEW 49 1,046 823 7
Johnson Matthey 31.03.03 John Sheldrick CIMA 53 426 362 8
Kelda Group 31.03.03 Martin Towers ICAEW 50 13 n/a 7mon
Kingfisher 01.02.03 Helen Weir CIMA 40 910 472 3
Land Securities Group 31.03.03 Andrew McFarlane ICAEW 46 380 146 2
Legal & General Group 31.12.02 Andrew Palmer ICAEW 49 588 510 3
Liberty International 31.12.02 Aidan Smith ICAEW 43 281 266 5
Lloyds TSB Group 31.12.02 Philip Hampton ICAEW 49 298 n/a 1
Man Group 31.03.03 Peter Clarke   43 2,049 1,729 3
Marks & Spencer Group 29.03.03 Alison Reed ICAEW 46 695 504 2
mmO2 31.03.03 David Finch ICAEW 47 734 393 2
Morrison (Wm) Supermarkets 02.02.03 Martin Ackroyd   52 299 254 16
National Grid Transco 31.03.03 Steve Lucas ICAEW 49 497 423 1
Next 31.01.03 David Keens ACCA 50 531 437 12
Northern Rock 31.12.02 Bob Bennett ICAEW 55 566 438 9
Old Mutual 31.12.02 Julian Roberts ICAEW 45 584 505 3
P&O Princess Cruises*6 31.12.02 Nick Luff ICAEW 35 478 341 3
Pearson 31.12.02 Rona Fairhead   42 301 n/a 1
Provident Financial 31.12.02 John Harnett ICAEW 48 302 292 4
Prudential 31.12.02 Philip Broadley ICAEW 42 619 543 3
Reckitt Benckiser 31.12.02 Colin Day ACCA 47 950 1,234 3
Reed Elsevier Group plc 31.12.02 Mark Armour ICAEW 48 689 598 7
Rentokil Initial 31.12.02 Roger Payne ACCA 54 591 557 2
Reuters Group 31.12.02 David Grigson ICAEW 48 690 641 3
Rexam7 31.12.02 Michael Hartnell ICAEW 60 552 491 16
Rio Tinto 31.12.02 Guy Elliott   47 619 n/a 18mon
Rolls-Royce Group8 31.12.02 Paul Heiden (now Andrew Shilston) ICAEW 46 868 679 4
Royal & Sun Alliance9 31.12.02 Julian Hance ICAEW 47 538 395 5
Royal Bank of Scotland 31.12.02 Fred Watt ICAS 42 1,433 690 3
SABMiller 31.03.03 Malcolm Wyman CA(SA)** 56 755 702 2
Safeway 29.03.03 Simon Laffin CIMA 43 436 454 7
Sage Group 30.09.02 Paul Harrison ICAEW 38 223 192 3
Sainsbury (J) 29.03.03 Roger Matthews ICAEW 49 632 562  
Schroders 31.12.02 Jonathan Asquith ICAEW 47 1,135 219 19mon
Scottish & Newcastle 28.04.03 Ian McHoul ICAEW 43 426 310 2
Scottish & Southern Energy 31.03.03 Gregor Alexander ICAS 40 140 n/a 1
Scottish Power 31.03.03 David Nish ICAS 43 644 349 4
Severn Trent 31.03.03 Alan Perelman   55 512 337 2
Shell Transport & Trading Co 13.12.02 none          
Shire Pharmaceuticals Group 31.12.02 Angus Russell ICAEW 46 444 393 4
Six Continents10 30.09.02 Richard North ICAEW 53 629 889 9
Smith & Nephew 31.12.02 Peter Hooley ICAEW 56 511 484 12
Smiths Group 31.07.02 Alan Thomson ICAS 56 626 567 8
Standard Chartered* 31.12.02 Peter Sands   41 732 n/a 15mon
Tesco 22.02.03 Andrew Higginson CIMA 45 1,513 1,308 6
Tomkins11 31.12.02 Ken Lever ICAEW 49 368 443 4
Unilever 31.12.02 Rudy Markham CIMA 57 1,122 1,087 3
United Utilities 31.03.03 Simon Batey ICAEW 49 465 444 3
Vodafone Group 31.03.03 Ken Hydon CIMA 58 1,582 1,327 18
WPP Group 31.12.02 Paul Richardson ICAEW 45 495 346 7
Whitbread 01.03.03 David Richardson ICAEW 51 498 362 2
Wolseley 31.07.02 Stephen Webster ICAEW 49 439 401 9
Xstrata*12 31.12.02 Trevor Reid   42 877 n/a 18mon
Total         64,663    

NOTES TO TABLE

1. Due to leave company at end of 2003.

2. Includes relocation expenses of 344,000 and additional allowances including compensation for loss of expatriate benefits of 250,000.

3. Retires at end of 2003. New FD is Charles Herlinger.

4. Received an additional 200,000 as the second and final tranche of compensation for loss of entitlement under his previous employer's bonus scheme (Diageo).

5. FD is not a board member.

6. Stood down from the board at the merger with Carnival. Now CFO of P&O.

7. Due to retire in 2003.

8. Retired 31 December 2002, now chief executive of FKI. Andrew Shilston, 47 (ICAEW), appointed January 2003.

9. Due to leave company in 2004.

10. Now chief executive of Intercontinental Hotels.

11. Latest figures are for eight months to 31 December 2002. Comparatives for full year to 30 April 2002.

12. Bonus payment of $443,000 on joining Xstrata.

* converted from US$ at a rate of $1.54:1

** South African chartered accountant

NOTES ON COMPILATION

We have used the most recent annual reports available. Additional information has been sourced from the PricewaterhouseCoopers Corporate Register. Two FTSE 100 constituents, Mitchells & Butlers and Intercontinental have been demerged from Six Continents. They have not yet produced annual reports so we have used Six Continents.

Survey research and reporting by Liz Fisher.

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