Executive pay leaps ahead 17%

Julia Finch and Jill Treanor
Friday October 4, 2002
The Guardian

Executive pay has once again outpaced average earnings, climbing an average of 17% last year.

More than 130 directors received total pay packages in excess of £1m and seven received more than £1m compensation when they left their jobs, according to the Guardian's annual survey of boardroom pay, conducted with pay consultants Inbucon.

The survey shows that executive remuneration has been largely unaffected by the stock market turmoil, which has wiped billions of pounds off the value of the companies they run.

Over the period studied the FTSE 100 index lost nearly a third of its value. At the same time inflation and earnings growth have been running at long-term lows. Growth in average earnings fell from 5% in December 2000 to 3.4% a year later, one of its lowest points in the last 35 years. It is now rising at 4%.

The results of the survey underline the findings of other studies which have highlighted the growing gap between executive pay and shopfloor wages. According to a recent Incomes Data Services report, the total earnings of FTSE 100 chief executives rose 89% in the five years to 2001, while full-time employees received a 28.7% rise.

The highest paid chief executive of an FTSE 100 blue chip company was Dutchman Bart Becht of Reckitt Benckiser, the Mr Sheen, Lemsip and detergent company. His total pay was more than £9m, with more than half generated from share options.

The average chief executive earned a total of £933,000 last year, but several companies have a raft of millionaire directors on their boards. Tesco and BP both have seven directors who earned more than £1m last year. Unilever and mining group BHP Billiton each have six millionaire bosses.

If payoffs are taken into account, the biggest earner was Ken Berry, the ousted head of record group EMI. He was fired with a £6.1m cheque after failing to find new acts and the disastrous signing of Mariah Carey, which ultimately cost the company £38m. Mr Berry's salary package for the same year brought in another £3.7m, making a total of £9.8m. EMI has recently been ejected from the FTSE 100 premier league of corporate Britain.

Another executive who stands out is Italian Francesco Bellini, 55, who is a part-time, non-executive director of Basingstoke-based Shire Pharmaceuticals, a company which specialises in drugs for hyperactive children.

He banked £19m last year after selling his business to Shire. However, only £16m came from the sale proceeds. He was also awarded £2.7m for losing his job as chief exec utive and has been granted a far higher than normal annual fee of £220,000 to continue as a part-time director. Mr Bellini also picked up an additional £36,000 in "cash benefits".

Of the 17% average increase in directors' pay, 13% was the result of rises in basic pay, with 4% down to bonuses and share option gains. In last year's Guardian/Inbucon survey the average rise was 28%, with base salaries ahead 22%.

The survey finds few links between executive pay and companies' financial performance.

Tony Ball, chief executive of BSkyB, earned £7.8m last year even though the company was the fifth worst performer of all those surveyed. During the period examined total shareholder return at BSkyB, which takes into account share price movements and dividend payments, fell by nearly half. But Mr Ball's package was twice what any executive earned in a top 10 performing company.

The chief executive of the best-performing FTSE company, Adam Applegarth of Northern Rock, earned £645,764 during the period, when total shareholder return at the bank rose 51%. Charles Banks at building materials group Wolseley also produced a 51% improvement in shareholder return, and his salary was £1.26m, of which £722,000 was a bonus.

No women appear among the 136 millionaire bosses and Marjorie Scardino, the chief executive of publishing group Pearson, continues to be the sole female chief executive of an FTSE company. She was the highest paid woman last year with a package totalling £525,000. Mrs Scardino gave up a £157,000 bonus she was entitled to even though the company's share price and profits had dived.

The survey also show that huge additions were made to directors' pensions. Lord Browne, 54, the chief executive of BP, had £2.4m poured into his retirement fund last year, the largest amount of any boardroom executive.