In contrast, directors at AIM-listed companies saw their total earnings increase by an average of 5 per cent in the past year.
Total earnings for FTSE-listed SmallCap company directors rose by an average of 15 per cent in the past year, according to a new report. In its latest Executive Compensation Review, Incomes Data Services (IDS) reveals that the earnings growth for SmallCap company directors has been driven by an upturn in incentive payouts – particularly share-based awards – rather than solely a recovery in salaries.
The study shows that Chief Executives of SmallCap companies saw their total earnings increase by an average of 16 per cent in the last year to £668,000, while their salaries increased by an average of 2 per cent to £374,500. IDS says that SmallCap company directors saw their bonuses increase by an average of 20 per cent while share-based long-term incentive plan (LTIP) awards increased by an average of 46 per cent. 74 per cent of SmallCap directors received a bonus payment and 30 per cent received an LTIP award.
In contrast to the sharp jump in total earnings for directors in SmallCap companies, directors at AIM-listed companies saw their total earnings increase by an average of 5 per cent, while total earnings for all small company directors increased by an average of 7 per cent.
Steve Tatton, editor of the IDS report, comments on the findings: "Earnings of directors at small companies have recovered strongly over the last year, but this has been largely fueled by the payout of some large share-based incentive awards rather than a spike in salaries. Salary growth has remained closer to inflation for these directors, suggesting that shareholders and smaller company remuneration committees are putting renewed focus on rewarding their executives for strong company performance, rather than a boost in base pay."
IDS points out that the salaries of Chief Executives at AIM-listed companies rose to £200,000 per annum, increasing by an average of 3 per cent, while they claimed £251,250 per annum in total earnings (up by 3 per cent). Broken down by sector, at AIM-listed firms, total earnings of Chief Executives in the financial services sector received £403,924.
Fewer AIM-listed directors benefited from incentive awards last year compared with their SmallCap counterparts. Just 52 per cent of AIM-listed directors received an annual bonus and only 5 per cent an LTIP award. Some 16 per cent of AIM-listed directors, however, did exercise share options.
"As remuneration committees face increasing scrutiny from investors, it is essential that they ensure their executive incentive schemes are robust, balanced, and well calibrated," Tatton continues. "Shareholders need to be reassured that any highly geared incentive schemes are truly delivering on their promise – that they will only pay out big rewards for truly outstanding performance."