The
typical pay package for chief executives of the FTSE 100 topped £2m last year,
according to research by Mercer Human Resource Consulting.
Of this, base
salaries were £600,000, while annual bonuses added another £400,000.
As well as the basic
cash elements, the typical CEO reward package included £550,000 in long-term
incentives through performance-based share awards and share options. Pensions
added a further £450,000.
The figures are
calculated based on a valuation method developed by Mercer in consultation with
members of the business community. Wider consultation is now being sought to
agree a methodology that would remove current inconsistencies in the disclosure
of executive pay.
"Pay packages
can be valued in different ways, and the figures that companies disclose are
open to wide interpretation," said Clare Turner, European principal at
Mercer Human Resource Consulting.
Recent reports by
the Independent and Guardian newspapers, for example, have shown up to a
three-fold difference in total pay values for the same directors.
"What’s
needed is a uniform approach to valuations so we can compare apples with
apples," said Ms Turner.
"Shareholders,
above all, need consistent and reliable information on which to base their
assessments of executive pay awards."
Mercer’s research
also highlighted variations in the value of different components of the CEO
package.
Long-term
incentives, which take account of performance conditions, varied from 45 per
cent of base salary for CEOs at lower quartile to 159 per cent for those at
upper quartile. Annual bonuses similarly ranged from 40 per cent to 101 per
cent of base salary.
The annual value
of pension was £800,000 at upper quartile, while the lower quartile value was
£180,000. The difference is generally accounted for by length of service and
type of scheme, with money purchase plans producing a lower value compared with
the gearing effect of final salary schemes.
Mercer also
researched the differences in pay levels by sector. Chief executives in the
media and consumer goods sectors reported the highest median total pay
(including pensions) of nearly £2,700,000.
Retail and
utilities (excluding telecommunications) reported the lowest median at
£1,700,000 and £1,250,000 respectively.
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