Eight years of fat cat fun

Top company directors have enjoyed yet another year of huge pay rises, which averaged over 16%. Now there are 123 executives in stock exchange companies earning over £1 million a year.

For the eighth year in succession, top executives' pay has rocketed, according to the latest Labour Research survey of boardroom pay. Directors of stock exchange companies earning over £500,000 a year have seen average pay rises of 16.1%, bringing the number of them to a record 487.

In all eight Labour Research surveys the average rises have been in double percentage figures. The rise in the 2001 survey was 18.8%, and this was preceded (going backwards) by annual rises of 21.2%, 10.7%, 15.7%, 16%, 16% and 10%.

Such figures mean that there has been an ever widening gap between boardroom pay and the rest of the workforce. The latest average pay rise of 16.1% is more than three times that of private sector workers generally. Official earnings figures show pay rises in the private sector have been running at less than 4.8% since April 2001.

And boardroom pay has substantially outpaced inflation, which has been running at less than 2.1% since April 2001.

In total, 198 directors got a pay hike above the average rise of 16.1%. And 19 got a pay rise of 100% or more.

The executive with the highest pay increase was Richard Ireland, chair of builders merchants Wolseley, who in his last year as a full-time executive got a 192.5% rise to £544,000.

But in cash terms he was nowhere compared to Luc Vandevelde, the Belgian brought in by Marks & Spencer to revive its fortunes. In the previous year he had waived his contractual entitlement to a bonus, but for this year the group's remuneration committee decided that he would not only get a bonus of 100% of salary but also half of the bonus he had foregone. This meant his salary leapt by 167.9% - from £834,000 to £2.2 million.

He still didn't make it to the top of the salary league, however. This spot was taken by Martin Bandier, a main board director at EMI and chief executive of its music publishing arm, who hit the number one spot with £3.7 million (see box page 11).

Bandier was not alone in the £1 million plus bracket. There were a record 123 top executives who were on £1 million or more - 20 more than last year's survey.

At the other end of the scale, Marcus Beresford, the chief executive officer of car and aerospace products manufacturer GKN, just crept into the reckoning when a 30.9% pay rise put him on £500,000. In all 364 directors received between £500,000 and £1 million - another record number.

Total bill

The total pay bill for the 487 executives came to £429.8 million - an average pay packet of £882,000.

The excuse for these huge pay cheques, which are decided on by boardroom remuneration committees, is that top executives must be dissuaded from seeking greener and richer pastures abroad.

However, leading international institutional investors have said that there is no real international market for top executives. The argument is described by Alistair Ross Goobey, chair of an International Corporate Governance Network (ICGN) committee that has drawn up new corporate rules, as "so much hooey".

A recent poll commissioned by the TUC, found that nearly three out of four people (73%) agreed with the statement "top directors should get pay rises at a similar rate as those given to the rest of the company's staff". And fewer than one in four (23%) agreed that "a company needs to pay the going rate for its directors, even if this means giving them pay rises that are much greater than the rest of the company's staff".

The government, after much delay, has finally got round to legislating on boardroom pay. In June trade and industry secretary Patricia Hewitt announced that regulations giving shareholders a vote on boardroom pay had been introduced and are due to become law before the end of the current parliamentary session.

The key proposal, which will apply to stock exchange quoted companies with financial years ending on or after 31 December 2002, are that quoted companies must publish a report on directors' pay as part of their annual reporting cycle. This must be approved by the board of directors with copies sent to the government's registrar of companies.

And companies must hold a shareholder vote on the report at each annual general meeting. The reports must include:

* details of individual directors' pay packages and justification for any compensation packages given in the preceding year;

* details of the board's consideration of directors' pay;

* membership of the board's remuneration committee;

* names of any remuneration consultants used, whether they were appointed independently and whether they provide any other services to the company;

* a forward-looking statement of the company policy on directors' pay, including details on incentive and share option schemes, an explanation of how packages relate to performance and details and explanation of policy on contract and notice periods; and

* a performance graph providing information on the company's performance in comparison with an appropriate share market index.

But, despite all this, the odds are short that next year Labour Research will again report another year of boardroom excess and that top executive pay has increased, again in double percentage figures.

The full package

The full extent of top directors' wealth often goes well beyond their basic salary, as can be seen from the benefits package enjoyed by Martin Bandier, a director of EMI and chief executive of its music publishing arm.

Bandier saw his basic salary rise in the latest year by 34.2% to reach £2,045,400, and his annual bonus, which comes on top, went up by 53.7% to £1,636,400. He also received benefits such as car and private health insurance.

Bandier owns 155,060 EMI shares, which would have provided him with £12,405 in dividends last year. In addition since May 2002 he has received a further 350,000 shares. He has 365,228 share options.

Stock exchange company directors on £1 million or more

Director Company (Financial year end) Pay (£000) % rise

Martin Bandier EMI (3.02) 3,727 41.1

Bart Becht Reckitt Benckiser (12.01) 3,363 29.5

Stanley Fink Man Group (3.02) 3,219 27.6

Lord Browne BP (12.01) 3,037 66.0

Paul Anderson BHP Billiton (6.01) 2,919 0.6

Charles Brady AMVESCAP (12.01) 2,836 -54.1

Dr Jean-Pierre Garnier GlaxoSmithKline (12.01) 2,518 20.9

Sir Terry Leahy Tesco (2.02) 2,457 52.8

Sir Christopher Gent Vodafone (3.02) 2,416 -64.9

Gerald Kaye Helical Bar (3.02) 2,299 -38.4

Luc Vandevelde Marks & Spencer (3.02) 2,234 167.9

Lawrence Fish Royal Bank of Scotland (12.01) 2,213 n.a

Terry Smith Collins Stewart (12.01) 2,201 1.9

Kevin Davis Man Group (3.02) 2,131 40.2

Jack Keenan Diageo (6.01) 2,121 1.3

Michael Spencer ICAP (3.02) 2,115 55.1

Tom Glocer Reuters (12.01) 2,065 n.a

David Reid Tesco (2.02) 1,990 48.3

Tony Ball British Sky Broadcasting (6.01) 1,937 27.9

Niall FitzGerald Unilever (12.01) 1,925 44.8

Warren Knowlton Pilkington (3.02) 1,923 154.0

Michael Slade Helical Bar (3.02) 1,906 -18.3

Andrew Stewart Collins Stewart (12.01) 1,902 -12.0

Matthew Barrett Barclays (12.01) 1,862 6.9

Michael Cemo AMVESCAP (12.01) 1,852 -35.0

Sir John Bond HSBC (12.01) 1,820 13.8

John Brock Cadbury Schweppes (12.01) 1,770 2.4

Christopher Fishwick Aberdeen Asset Management (9.01) 1,753 2.9

Paul Walsh Diageo (6.01) 1,749 16.2

John Gildersleeve Tesco (2.02) 1,737 46.1

Peter Clarke Man Group (3.02) 1,729 22.5

Peter Sedgwick Schroders (12.01) 1,727 -46.4

Michael Brown Helical Bar (3.02) 1,672 -7.6

Tony Pidgley Berkeley Group (4.01) 1,625 120.2

Padraic Fallon Euromoney Institutional Investor (9.01) 1,620 29.8

Peter Winkworth Close Brothers (7.01) 1,614 68.5

Julian Horn-Smith Vodafone (3.02) 1,607 -47.0

Christopher Mills North Atlantic Smaller Companies IT (1.02) 1,579 23.9

Terry Burman Signet (1.02) 1,575 -10.3

Fred Goodwin Royal Bank of Scotland (12.01) 1,572 n.a

Stuart Rose Arcadia (8.01) 1,568 n.a

Philip Bowman Allied Domecq (8.01) 1,558 17.5

John Peace GUS (3.02) 1,551 -3.5

Brian Gilbertson BHP Billiton (6.01) 1,548 41.3

Sir Clive Thompson Rentokil Initial (12.01) 1,543 43.4

Roderick Kent Close Brothers (7.01) 1,534 73.5

Doug Ford BP (12.01) 1,519 22.7

Keith Whitson HSBC (12.01) 1,515 12.9

Martin Broughton British American Tobacco (12.01) 1,514 5.7

Stewart Cline George Wimpey (12.01) 1,461 n.a

Michael McLintock Prudential (12.01) 1,446 n.a

Rodney Chase BP (12.01) 1,418 24.2

John Sunderland Cadbury Schweppes (12.01) 1,418 -8.6

Paul Lorenzini Bunzl (12.01) 1,412 14.0

Howard Stitzer Cadbury Schweppes (12.01) 1,393 n.a

Mervyn Davies Standard Chartered (12.01) 1,389 14.3

Tim Mason Tesco (2.02) 1,370 56.8

Mark Tucker Prudential (12.01) 1,344 20.1

Sir Geoffrey Mulcahy Kingfisher (1.02) 1,343 -7.7

Michael Bailey Compass (9.01) 1,337 28.3

David Prosser Legal & General (12.01) 1,333 5.7

Tom McKillop AstraZeneca (12.01) 1,332 4.9

Robert Graham AMVESCAP (12.01) 1,327 -52.9

Ken Hydon Vodafone (3.02) 1,327 -56.3

Peter Bamford Vodafone (3.02) 1,325 -35.0

Sir Robert Wilson Rio Tinto (12.01) 1,319 26.5

Robert Brace BT (3.02) 1,310 -0.1

Charles Allan Granada (9.01) 1,308 n.a

Andrew Higginson Tesco (2.02) 1,308 61.7

Byron Grote BP (12.01) 1,294 n.a

Terry Duddy GUS (3.02) 1,294 75.6

Gareth Davis Imperial Tobacco (9.01) 1,291 37.8

Richard Fulford-Smith Clarkson (12.01) 1,285 170.0

Rowley Ager Tesco (2.02) 1,285 49.1

Tom Oliver Six Continents (9.01) 1,267 22.3

Tony Isaac BOC (9.01) 1,231 -20.6

Francis Mackay Compass (9.01) 1,204 39.4

David Eldon HSBC (12.01) 1,204 4.5

Charlie Banks Wolseley (7.01) 1,201 17.2

Sir Ian Prosser Six Continents (9.01) 1,200 2.3

Dick Olver BP (12.01) 1,192 24.1

Leigh Clifford Rio Tinto (12.01) 1,178 30.9

Tony Carey Berkeley Group (4.01) 1,163 130.8

Richard Ensor Euromoney Institutional Investor (9.01) 1,162 6.9

John Buchanan BP (12.01) 1,150 13.7

David Potts Tesco (2.02) 1,150 76.7

Michael Davis BHP Billiton (6.01) 1,147 22.4

Crispin Davis Reed Elsevier (12.01) 1,146 3.9

Philip Clarke Tesco (2.02) 1,141 74.7

Colin Day Reckitt Benckiser (12.01) 1,139 n.a

Keith Butler-Wheelhouse Smiths Group (7.01) 1,132 34.1

Ulrich Herter British American Tobacco (12.01) 1,131 6.3

Håkan Mogren AstraZeneca (12.01) 1,127 8.8

Kaikhushru Nargolwala Standard Chartered (12.01) 1,127 -1.8

John Hodson Singer & Friedlander (12.01) 1,126 23.5

Keki Badiseth Unilever (12.01) 1,126 n.a

Tony Trahar Anglo American (12.01) 1,122 60.3

Iain Robertson Royal Bank of Scotland (12.01) 1,114 n.a

Raymond Mould Pillar Property (3.02) 1,103 31.2

Larry Pillard Tate & Lyle (3.02) 1,101 67.6

Patrick Vaughan Pillar Property (3.02) 1,100 31.0

Sir Peter Davis J Sainsbury (3.02) 1,098 2.1

Rudy Markham Unilever (12.01) 1,087 58.5

Philip Watts Shell Transport & Trading (12.01) 1,082 46.6

John White Persimmon (12.01) 1,076 38.2

James Crosby HBOS (12.01) 1,073 55.5

John Ritblat British Land (3.02) 1,067 12.1

David Phillips Chelsfield (12.01) 1,058 24.2

Martin Gilbert Aberdeen Asset Management (9.01) 1,052 27.2

John Llewellyn-Lloyd Close Brothers (7.01) 1,041 94.9

Miklos Salamon BHP Billiton (6.01) 1,040 29.0

David Crossland MyTravel (9.01) 1,039 70.0

Gordon Pell Royal Bank of Scotland (12.01) 1,039 n.a

Nick Rose Diageo (6.01) 1,037 19.5

Robert Mendelsohn Royal & Sun Alliance (12.01) 1,033 -1.1

Colin Keogh Close Brothers (7.01) 1,021 60.5

Thomas Geitner Vodafone (3.02) 1,021 n.a

Jonathan Bloomer Prudential (12.01) 1,016 19.8

Roger Lewis Berkeley Group (4.01) 1,015 180.7

Paolo Scaroni Pilkington (3.02) 1,012 -10.8

Rolf Borjesson Rexam (12.01) 1,012 52.2

Hubert Harris AMVESCAP (12.01) 1,007 -30.8

Peter Ellwood Lloyds TSB (12.01) 1,001 16.9

Key points

* top executive pay has soared for the eighth year in succession

* this year's average rise was 16.1

* a record 487 executives were on £500,000 or more

* a record 123 of these were on over £1 million

* the pay bill for the 487 totalled £429.8 million