A spotlight on executive pay suggests the direction of travel is likely to remain upwards, despite new regulations that drive greater transparency on remuneration policies.
Last October, new regulations gave shareholders the power to approve directors’ remuneration through a binding vote. It is perhaps no coincidence that since then Charles Stanley, Rathbones and Brewin Dolphin have all made amendments to their bonus schemes for executive directors.
All three have sought to link bonuses more overtly to individual performance and the long-term delivery of strategic objectives, through long-term incentive plans (LTIPs).
Brewin Dolphin introduced an LTIP for its executive directors, where a conditional award of its shares is given three years later. It also lowered the maximum bonus level in its remuneration report, which formed part of its annual financial report in 2013.
The maximum bonus is 200% of total fixed pay, with the exception of Michael Williams, whose bonus is assessed in relation to the profitability of his investment management team.
The move coincided with a board reshuffle and a management overhaul, as executive chairman and chief executive Jamie Matheson left, to be replaced by David Nicol. Similarly, Rathbones and Charles Stanley have both replaced an executive profit-sharing scheme with a performance-targeted scheme.
Bonus caps reduced
Rathbones went as far as reducing the maximum bonus offered from 200% to 125% of salary, alongside a variable pay cap of 200% of salary.
Meanwhile, Close Brothers caps annual bonuses for executives at 300% of base salary, although a maximum of 100% of salary is paid out in cash. The remainder is deferred into shares, vesting one-third per year over three years.
Recruitment consultant Dan Macey of Suffolk Lane Search said bonus policies have become much clearer. ‘Candidates want clarity on what they are going to earn. This is something we are seeing more and more of,’ he said.
He added bonus schemes also had a much bigger weighting towards share awards and LTIPs.
In Macey’s experience, most executive directors and chief executives receive total packages of between £250,000 and £500,000. He believes they are likely to rise from current levels, against a positive backdrop for the sector.
At Brewin Dolphin, Nicol’s total remuneration – inclusive of salary, benefits, pension and bonus, but excluding long-term incentives – totalled £414,000 over the year to the end of September.
It came in lower than finance director Andrew Westenberger, who received £508,000, and executive director Michael Williams, who received £575,000, up from £362,000 in 2012.
Matheson was awarded £332,000 in total remuneration in 2013, down from £562,000 the previous year. Having left in March 2013, he saw the majority of this figure come from a £170,00 payment to compensate for his exit. The group said no executive director salary increases were planned for 2014.
Upwards and onwards
At Rathbones, executive salaries were increased in line with the rises that most of its employees received in 2013. Outgoing chief executive Andy Pomfret took £1.2 million in total remuneration on departure, benefiting from a £398,000 payout from long-term incentives.
He was followed by head of investment management Paul Chavasse, who earned £879,000 during 2013, up from £797,000 in 2012, while finance director Paul Stockton took £738,000, down £25,000 on the previous year.
Close Brothers’ chief executive Preben Prebensen’s base salary was £500,000, and on top of this he earned a bonus of £1.5 million in the group’s 2013 financial year. With allowances and other benefits, his total remuneration came in at £2.13 million, up from £1.98 million in 2012.
Two other executives also received seven-figure total remuneration packages, with Stephen Hodges, managing director and banking chief executive, earning £1.88 million in total, while finance director Jonathan Howell got £1.58 million.
Charles Stanley bucked this trend, however. Its chairman and managing director Sir David Howard received total remuneration of £414,000 for 2013-14, albeit a more recent figure than for some of the other groups, coming in its 2014 annual financial report. This compares to £431,000 in 2013.
Michael Lilwall, who is responsible for Charles Stanley Securities, received a higher total package of £428,000, down £17,000 on the previous year.