Manifest/MM&K survey shows under ‘remuneration awarded’ measure, executive pay rises in 25 FTSE 100 firms topped 41%
The soaraway pace of boardroom pay is highlighted in a survey on Tuesday, which shows the bosses of FTSE 100 companies enjoyed an average 12% rise in their take home pay last year, while their employees barely received any pay increases.
Bob Diamond, chief executive of Barclays, is named as the highest paid chief executive of any FTSE 100 company in 2011 under a new methodology designed to replicate rules being introduced by the government that requires companies to publish one overall figure for executive pay. Diamond had £20.9m of “realisable remuneration”, which includes salary and any long-term bonuses that have vested during the year as well as any share options that could be cashed in.
Second highest paid director is Sir Martin Sorrell, chief executive of media and advertising company WPP, who on the same measure received £11.6m.
The survey by corporate governance expert Manifest and pay consultants MM&K is released as WPP braces for a defeat of its remuneration report over Sorrell’s pay package at Wednesday’s annual meeting in Dublin.
If the WPP remuneration report is defeated – largely over a 30% rise in salary for Sorrell to £1.3m – it would mark a record year for defeats of pay plans since the vote was first introduced nearly 10 years ago. The annual meeting season for the 2011 financial year currently underway has been dubbed the “shareholder spring” as five remuneration reports have been voted down, matching 2009. Six would be a record.
The country’s biggest water supplier, Thames Water, became the latest company to face a backlash over its pay after handing its chief executive an annual bonus which is nearly as big as his salary, sparking union anger.
Martin Baggs was paid £418,359 on top of his £425,000 basic pay despite presiding over a hosepipe ban, a drop in profits, and falling customer satisfaction. He will also be in line for hundreds of thousands of pounds worth of shares in the next four years under a long-term incentive plan.
Gary Smith, national officer of the GMB union, which represents water workers, said: “This is a classic case of reward for failure. It is an absolute outrage.”
The Manifest/MM&K survey highlights the huge differences in complex pay deals across FTSE 100 companies made up of salaries, one-year bonuses and payout from long-term plans spanning three or five years.
Using a measure of “remuneration awarded” – salary, any cash, benefits and the expected value of deferred bonuses and share options – the survey found that the median increase in chief executive pay in FTSE 100 companies was 10% but in more than 25 of these companies the rise was greater than 41%. Employees at FTSE 100 companies got mean average rises of 1%.
“Shareholders are enraged, the survey results are likely to increase their state of agitation,” the report said.
The average remuneration awarded to chief executives across the FTSE 100 was £4.8m, while the average of the “remuneration receivable” was £4.2m,
The survey provided details of the top 10 highest paid executives on the basis of the “remuneration receivable” measure, all of whom received at least double the £4.2m average. After Diamond and Sorrell, the next highest paid boss was David Brennan, who quit Astra Zeneca, with £11.3m and Andrew Witty, chief executive of pharmaceutical group GlaxoSmithKline, who received £10.7m.
It is not yet clear what elements of pay the business secretary, Vince Cable, will demand is included in the “single figure” that he wants companies to produce for boardroom executives to avoid confusion about the pay of top bosses through multi-pay plans spread over a number of years. Some companies have tried to pre-empt the official requirement by publishing their “single figure” and the survey has embraced one that it believes could be used and was adopted by Legal & General in its annual report this year. The survey said that the rise in pay was driven by increases in deferred bonuses and longer-term incentive awards as salaries alone rose by a smaller amount, 2.5%.
Cable has been credited with encouraging the “shareholder spring” through consultation on executive pay but is now facing criticism from Labour over signalling a reversal on annual binding votes on pay. The current votes are advisory and can be ignored by companies and while this vote was to remain, Cable had considered a separate annual binding vote on future pay deals. He is now considering whether such binding votes will take place every three years. A decision is expected by the end of the month.
Top 10 highest paid chief executives
Bob Diamond, Barclays £20.9m
Sir Martin Sorrell, WPP £11.6m
David Brennan, AstraZeneca £11.3m
Sir Andrew Witty, Glaxo £10.7m
Marius Kloppers, BHP Billiton £9.8m
Peter Voser, Shell £9.7m
Sir Frank Chapman, BG £9.6m
Michael Spencer, ICAP £9.3m**
Samir Brikho, Amec £8.9m
Dame Marjorie Scardino, Pearson £8.9m
Includes salaries, bonuses and any share options that could be cashed in during the year