CEOs' pay hits the heights

2003

The basic salaries of FTSE 100 chief executive are still rising at over three times the rate of inflation, according to a new study by consultants at Watson Wyatt, although the rate of increase has slowed over the past 12 months.

Based on a matched sample of chief executives of FTSE 100 companies, Watson Wyatt's Executive Reward Survey found that the median basic salary increase over the past year was 7.8 per cent, compared to 8.4 per cent in 2002. For FTSE 250 CEOs, the median increase was 5.1 per cent compared to 6.6 per cent in 2002.

The figures mean that the median basic salary for CEOs of FTSE 100 companies is now £650,000. With the addition of annual bonus payments, the median total cash rises to just over £1 million; and when the value of long-term incentives is included, the median total direct compensation amounts to just over £1.5 million.

In general terms this year, CEOs’ bonuses represent 47 per cent of basic salary and the value of long-term incentives represents 74 per cent at the median (using Watson Wyatt's Present Economic Value method to put a consistent value on the variety of different long-term plans operated by the participants).

The survey also found that more companies are taking a "portfolio" approach to long-term incentives. More than half (56 per cent) of FTSE 100 participants and half of FTSE 250 participants provide a combination of long-term incentives, permitting executives to participate in more than one share option plan, performance share plan and/or restricted share plan in the same year.

Last month, Pay analysts Income Data Services (IDS) released figures that showed that the average earnings of lead executives of FTSE 100 companies had risen by 288 per cent over the past decade, some six times faster than average incomes.

IDS also reported that six out of ten lead directors of FTSE 100 companies received total earnings in excess of £1 million.