Big pay and rewards disparity between directors of similar-sized companies

Total reward for senior directors of AIM (Alternative Investment Market)-listed companies is significantly lower than that of their equivalents at similar-sized organisations listed on the FTSE small capitalisation (SmallCap) index.

A recent report from executive remuneration specialist Hewitt New Bridge Street (HNBS) found that the highest paid directors of the 100 largest AIM companies enjoyed median total reward packages of “around £460,000”. This includes a median salary of about £230,000.

HNBS said the total reward figure is 30% to 40% lower than that paid to bosses of equivalent-sized FTSE SmallCap companies.

The survey also found that AIM-listed company directors tended to have fixed salaries and share option plans as part of their reward schemes, rather than bonuses and long-term incentive performance (LTIP) plans, which are more prevalent among FTSE SmallCap companies.

Commenting, HNSB principal Rob Burdett said: “I am surprised to see greater emphasis on fixed pay among AIM 100 companies. While some directors may be founder shareholders, and thus clearly incentivised by business performance, companies may be missing an opportunity to motivate executives via variable pay elements, such as bonuses or long-term incentives, with reward dependent on challenging performance targets.

“A pillar of UK best practice is that awards are made subject to challenging performance conditions. However, AIM 100 companies appear to have resisted the move towards LTIPs, which offer a closer correlation between management performance and reward in comparison to options where absolute share growth can be impacted by external factors.”

The research also found that 55% of directors of AIM-listed companies have defined contribution pension plans with a median contribution of 10% to 15% of salary.

There are more than 3,000 companies listed on the London Stock Exchange AIM, while the FTSE SmallCap comprises 300 companies that are outside the main market.

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