Shares down 24%. Average earnings up 3%. Boardroom pay up 23%

Interesting post from another newsgroup.

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Shares down 24%. Average earnings up 3%. Boardroom pay up 23%

Julia Finch and Jill Treanor Thursday July 31, 2003 The Guardian

Boardroom pay rose seven times as fast as average earnings last year, with the senior directors of the UK's biggest 100 companies receiving an average

23% rise.

The average pay for a FTSE-100 chief executive, including bonuses, gains from share options and other incentive plans, is now £1,677,685, a survey by the Guardian reveals. The chief executives' average basic salary is £596,817.

A total of 190 executive directors were paid more than £1m last year - up from 130 in 2001.

The highest paid was Brian Gilbertson, until recently chief executive of the mining company BHP Billiton, who was paid a basic salary of £798,842. However, after bonuses, benefits and incentive scheme payments, his total reward was £9.1m. Mr Gilbertson has since been ousted from the company after a boardroom row, and walked away with a golden handshake worth an additional £16m.

Last year's 23% rise is higher than the 17% recorded by the Guardian survey for the year 2001. A year earlier the rise was 28%.

The rate of increase in UK boardroom pay has not slowed despite last year's dramatic falls in share prices. In 2002 the FTSE-100 index recorded its biggest ever annualfall, dropping 24.4% - its third annual fall in a row. At the same time inflation remained at long-term lows while average earnings in the year to January grew by only 3.2%.

At the turn of this year the value of the companies in the FTSE-100 index had tumbled almost 50% from their peak three years earlier. Over the same period, however, boardroom pay advanced by more than 84%.

The results of the Guardian survey come at the end of one of the most explosive periods in the relationship between company directors and the shareholders who own the companies. There have been unprecedented protest votes at annual general meetings against directors' pay and contracts that perpetuate rewards for failure.

Corporate history was made when 51% of shareholders voted against the remuneration policy of the pharmaceutical company GlaxoSmithKline, in protest at the £22m pay-off the company's chief executive, Jean-Pierre Garnier, would receive if fired.

Mr Garnier is ranked only 11th in the league table of best paid chief executives.

Among chief executives who earned more than Mr Garnier are businessmen such as Tesco's Sir Terry Leahy, Lord Browne of BP and Vodafone's Sir Christopher Gent, who retired yesterday.

Several companies have a raft of millionaire directors. All eight full-time directors of the supermarket chain Tesco earned more than £1m. Their total wage bill topped £20m. Seven directors of Unilever and six at BP also received more than £1m in the year.

Only one woman made it into the league of millionaires - Helen Weir, the finance director of Kingfisher, the group which owns B&Q. However, her place in the million aire's club was earned as a result of a £340,000 relocation allowance, paid when she moved barely 40 miles nearer to - and still a one hour commute from - her central London office.

The Guardian investigation shows that 10 executives received pay-offs of more than £1m after they quit or were fired.

The trade and industry secretary, Patricia Hewitt, has made it clear that the government will no longer tolerate such big payments for failure and has threatened to introduce legislation if boardrooms do not make changes voluntarily.

New City guidelines on boardroom standards are urging directors to take account of shopfloor pay when setting their own levels of remuneration.

Among the most controversial pay-offs are the £1.4m paid to Bob Mendelsohn, the former chief executive of the insurance group Royal & SunAlliance. Mr Mendelsohn, who had pledged not to take a pay-off should he fail to drive the company forward, oversaw a 90% fall in the company's share price and

12,000 job cuts. The pay-off figure excludes a £354,000 annual pension.

Elsewhere, Abbey National paid £4.5m to get rid of five main board directors whose strategy had driven the bank to a £1bn loss.

Another golden goodbye to attract criticism was the £3.2m paid to the former Cadbury director John Brock. Mr Brock quit when he was overlooked for promotion, and was actually paid less than he was entitled to. Just 15 days after announcing his departure he revealed he had another top job, as chief executive of the brewing group Interbrew.

Companies are also paying increasingly large sums simply to hire new talent. Five directors were paid more than £500,000 to accept a new job.

The size of the pension pots amassed by current and departing directors also highlights the widening gap between the boardroom and the shopfloor.

At a time when hundreds of companies are closing down final salary pension schemes and employees are facing higher contributions and longer working lives, many directors continue to have hundreds of thousands of pounds pumped into their pensions by their companies.

The biggest pension pot belongs to Sir Richard Sykes, the former chairman of GlaxoSmithKline, who has more than £15.2m put to one side. It is generating £729,000 a year in income.

In total eight directors have pension pots of more than £10m.

GSK's Mr Garnier, however, can look forward to the biggest annual pension of them all. He has so far guaranteed an annual retirement income of £929,000, even though he is still only 55.

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Stephen

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System Prompt
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The real scandal is that taxes and NI are up, the average working person's real take home pay has fallen, and more and more of our money is spent on "facilitators" and "co-ordinators". But don't expect The Guardian to write about it, since it publishes the adverts for these jobs.

Reply to
Eliah Grabbet

The basic point is that many large companies are now multinationals, and even those which aren't are competing for directors with those which are. Pay for directors in the UK is still way behind US levels, hence it's likely to continue to be pulled up.

Reply to
Stephen Burke

Why not? The basic point is that many large companies are now multinationals, and even those which aren't are competing for directors with those which are. Pay for directors in the UK is still way above Asian and African levels, hence it's likely to continue to be pulled down.

Strange how directors only mention the U.S. when making comparisons.

Reply to
Bruce Robson

Well it's obvious. The most successful companies are American. Like Toyota Sony Mercedes/Daimler HSBC Nokia .

Lets look at some American companies. Tyco, MCI, World com, Enron, Chrysler . Pan Am airlines, Pets.com, AOL Time Warner etc etc etc.

Simple thing. If the employees of the company of the company are stealing money or mismanaging it why would anyone want to emulate anything they are doing?

Try running your company opposite to the way US CEO's are and then the companies will have more money for production and marketing. Hell they might even make money. Novel thought that eh? A company making money and not looting the retirement savings to buy a new jet for the CEO and board.

Stephen

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System Prompt

You may pay someone 5 million a year and they may be successful but what's the likelihood that they will be any more successful than a person in the pool that would accept 500,000 a year?

Peter Saxton from London snipped-for-privacy@petersaxton.co.uk

Reply to
Peter Saxton

I dont think there is a going rate of several million. A business may have several hundred people on 250k a year and choosing the best one and offering them double should be acceptable. Will they turn it down and say "no, I am going to stay on 250k and hope someone offers me 5 million"?

Peter Saxton from London snipped-for-privacy@petersaxton.co.uk

Reply to
Peter Saxton

And plus there is always the option of making wages contingent upon success, like the people lower down in sales. A base of 500K with a

1.5% share of any increase. If they are good they'll jump at the chance (i.e. Jack Welch ex CEO of General Electric and what happened to that company under his leadership). More than one way to deal with a situation

Stephen

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System Prompt

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