Basic salaries for executive directors in FTSE 100 companies are increasing at a rate of four times that of inflation taking annual compensation close to £1.5 million, according to new research.
The Waston Wyatt Reward Survey 2002 reveals that the average salary for chief executives is £630,000 and with bonuses included the figure rises to £984,000.
When the effect of long-term incentives are taken into account the figure reaches £1,494,000. Basic salaries represent just 39 per cent of total reward packages. Long-term incentive plans and annual bonuses account for 48 per cent with pensions and other benefits making up the rest.
While employees appear to be getting final-salary pensions stripped away from under them, the trend does not appear to be affecting higher management.
However, the traditional non-contributory final salary plan with an accrual rate of 1/30th of final pensionable salary is becoming less common, the report notes, with accrual rates of 1/60th for each year of service taking its place:
”One reason for this – particularly for newly appointed executives – may be the increasing impact of the earnings cap which limits the tax approved pension that employees can receive,” said Watson Wyatt’s Andy Christie.
Directors are also becoming more used to performance related pay. The higher up the organisation, the more important its use appears to be.
”This is because companies are employing “line of sight” principles when designing bonus plans, ensuring that there is some link between a performance measure and the level of influence the individual has over its achievement,” Christie says.
Share option scheme are popular with nearly four in five (79 per cent) operating share option plans and half operating performance restricted share plans. When it comes to long-term incentives companies appear to using a “portfolio” approach.
Well over half (54 per cent) of FTSE 100 companies and a quarter of high levels managers in the FTSE 250 offer both these types of share deal mentioned.