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|
|Anglo American||31.12.02||Tony Lea||54||663||632||4|
|Associated British Foods||14.09.02||John Bason||ICAEW||45||458||415||4|
|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|
|BT Group||31.03.03||Ian Livingston||ICAEW||38||1,116||n/a||1|
|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|
|Cable & Wireless3||31.03.03||David Prince||51||316||n/a||1|
|Cadbury Schweppes||29.12.02||David Kappler||CIMA||55||844||826||8|
|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|
|Dixons Group||03.05.03||Jeremy Darroch||ICAEW||40||392||46||18mon|
|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|
|Gallaher Group||31.12.02||Mark Rolfe||ICAEW||44||571||447||3|
|HSBC Holdings*||31.12.02||Douglas Flint||ICAS||47||960||848||8|
|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|
|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|
|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|
|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|
|Provident Financial||31.12.02||John Harnett||ICAEW||48||302||292||4|
|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|
|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|
|Sage Group||30.09.02||Paul Harrison||ICAEW||38||223||192||3|
|Sainsbury (J)||29.03.03||Roger Matthews||ICAEW||49||632||562|
|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|
|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|
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 accountantNOTES 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.