Directors' basic pay rises 12% in 2007

A report on directors’ pay at companies listed on the Irish Stock Exchange has found an average basic pay rise of 12% last year.

But the report, carried out by consulting company Hewitt Associates, said the increase was 30% when other elements such as bonuses and share options were included.

The report will raise hackles in union circles as bosses called a pay pause in the run-up to talks on a new national pay agreement. Average earnings for a worker is estimated at around the €35,000 mark.

The research that an average of 40% of directors’ earnings are now dependent on elements which are linked to performance.

Hewitt looked at remuneration packages for the directors of 69 companies listed in Dublin. The average salary for a company’s highest paid director was €610,000. The total pay package for the highest-paid director in each firm typically ranged from €496,000 for smaller companies to €2m for larger firms.

Share options still appear to be the most popular choice as part of the total reward package.

Finance directors’ salaries tend to be around two thirds of their CEO’s salary, while other executive directors’ salaries tend to be slightly lower at 60%, depending on the relative importance of their role.

Commenting on the survey Rachael Ingle, director at Hewitt, said directors’ reward comprises two basic elements — fixed pay and variable pay, which is incentivised and based on performance. Over the past few years, international investors have been increasingly interested in how directors are motivated.

“As a result of this we are seeing an evolving culture of ‘pay for performance’, with companies motivating their directors by bringing their interests more in line with that of their investors.

“We can now see this trend firmly taking root in companies listed here, with a significant amount of director’s remuneration linked to business – rather than purely personal – performance. Ms Ingle said this sends a “very positive” signal to investors who are interested in the Irish market, as it reflects European and international best practice.”

Article courtesy of the Evening Echo newspaper.