Report shows 66% drop in average bonus to CEO of listed firms

New research from global human resources company Hewitt Associates shows a major fall in the total salaries for directors of companies listed on the Irish Stock Exchange (ISE) in 2009, when compared to the previous year.

The report on Irish Directors’ Remuneration 2009, found that 63% of companies awarded no salary increases while many companies had reduced directors' wages.

In relation to bonus payments, the average bonus paid to a Chief Executive in 2009 was 19% of salary, which compares to a figure of 60% in 2008.

Hewitt researched the remuneration packages for directors of all 69 companies listed on the ISE.

The research shows that the median fixed salary for the highest paid director in this period was €612,000, which was up slightly from €610,000 in 2008.

When performance-related bonuses and other variable pay elements are included, however, the median total remuneration for the highest paid director was €936,000, down 27% from the 2008 average of €1.3m.

Kieran Barry, Managing Director at Hewitt, said: "What we are seeing is a reduction in the variable pay element of total remuneration as the 'paid for performance' culture is growing. This was identified in our 2008 report and it is clear from the latest results that companies are expected to link pay with performance. In addition shareholders require executive interests to be aligned with their own."

The fall in total remuneration for all executive roles since 2008 is primarily due to the reduced levels of long-term incentives awarded.

Hewitt’s research shows that while the shift away from option plans towards long-term incentive plans (LTIPs) has continued, 55% of companies still operate market value option plans only, as compared to 60% in 2008.

Significantly, more than half of companies listed on the ISE reported that they had not granted any award to their Chief Executives in 2009.

In relation to pensions, over 40% of companies operate a defined contribution pension plan only while 30% reported that they continue to operate a defined benefit plan.

As in 2008, the median level of contribution to defined contribution plans remains at around 20% of salary for executive directors.