The annual analysis of FTSE 100 reports by Monks shows that:
• Over the last 12 months the base salary of the typical chief executive rose 14.9% to $539,000;
• The typical chief executive received a bonus of 46.9% of base salary;
• Share options remain the most common form of long-term incentive.
The analysis* is based on the companies which were members of the FTSE 100 on 18 June 2001. Year-on-year base salary increases for full-time chairmen or chief executives have increased by 14.9% at the median. This compares with 8.4% in 2000.
Increases in total earnings, which are defined as base salary plus any annual bonus payment, are higher than in 2000 at 16.7%. Monks' analysis is based on 73 post holders who held the same position during the year reported in the 2000 and 2001 annual report.
Commenting on this year's findings the report editor, David Atkins said: "This year's report contains only 80 of the companies which were in our 2000 analysis. Almost all the 'new economy' companies have left the FTSE 100, to be replaced by 'old economy' companies such as Associated British Foods, Hanson, Safeway and Wm Morrison Supermarkets.
"In addition to these changes there have been a number of large mergers for instance BP and Amoco, CGU and Norwich Union, Glaxo Wellcome and SmithKline Beecham and, of course, Vodafone and Mannesmann. It is, therefore, not surprising that base salary increases to chief executives are in double digits, reflecting the increased size of some companies and the shortage of individuals with skill and experience to manage businesses which, increasingly, are global.
"Further analysis shows that, with the exception of the telecommunications sector, the highest increases were to directors in lower paying sectors of the economy – notably utilities, computing, engineering and construction. Increases to directors in high paying sectors such as media companies and consumer goods companies were the lowest."
The report's findings indicate that other executive directors' base salaries advanced at a lower level than those of chief executives, at around 2% above 2000 levels. Depending on job function, total earnings for other directors were between 3.4% and 5.1% above 2000 levels.
There is a wide variation between sectors: the highest total earnings of chief executives were in the consumer goods sector with a median of $1,066,000 (Other Financial & Property in 2000) and the lowest in utilities with a median of $597,000 (Computing / High Technology and Telecommunications in 2000).
* Board Pay & Incentive Practice in FTSE 100 Companies
About Monks Partnership
Monks is part of PricewaterhouseCoopers Human Resource Consulting practice. The company specialises in all aspects of board and management pay, incentives and benefits in the United Kingdom and 15 other countries in Europe. Monks Partnership is a trading name of PricewaterhouseCoopers.