FTSE 100 executives pull ahead
November 24 2006 - A new survey has found that the strong performance of many FTSE 100 companies is reflected in significant increases in the total direct compensation for CEOs and other board directors, mostly in the form of bonuses and other elements of 'at risk' pay.
Watson Wyatt's Executive Reward Survey is a detailed analysis of the total remuneration of over 1900 senior executives in 120 of the UK's largest companies. According to the 2006 findings, the total direct compensation of FTSE 100 companies has increased by 30 per cent over the past year, taking the median to just under £3 million before adding in the value of pensions.
Sue Bartlett, a senior executive reward consultant at Watson Wyatt said:
"The strong performance of UK businesses is a significant contributor to bigger executive bonuses and suggests that the continued move towards 'pay for performance' is having a positive impact. Companies are increasing the maximum size of bonuses payable and the amounts payable for on-target performance."
The Watson Wyatt survey shows that in FTSE100 companies, typical bonus plans now pay CEOs 85 per cent of salary for reaching target and 150 per cent of salary at maximum. For executives in FTSE 100 companies who are two full reporting levels below the main board, bonuses of 30 per cent of salary are available for on-target results and 50 per cent for top performance.
Basic salaries of executives of FTSE 100 companies have continued to pull away from salaries of those in smaller companies. Median salary increases in 2006 were 7.1 per cent for chief executive officers of FTSE 100 companies, 6.5 per cent in FTSE 250 companies and 4.7 per cent in small cap companies.
CEOs did not see the biggest percentage salary increases in 2006. In FTSE 100 companies the median increase for finance directors was 9.4 per cent and 8.4 per cent for other board directors.
Sue Bartlett added:
"Salary is far from the whole story. For CEOs, it typically accounts for only 40 per cent of the total value of the package if you include long-term incentives and pension. Our survey results show a continuation of the trend for the value of bonuses and the size of long-term incentive awards to grow faster than salary."