Chief executives see bonuses plunge 66%

CHIEF executives in Ireland saw their bonuses plunge 66% last year while their pension schemes collapsed.

Non-executive chairman fees, however, increased by 3%, which a new study says reflects the greater time commitment that they are giving to their companies.

The average bonus paid to a chief executive last year was 19% of salary, compared to 60% in 2008, according to a survey conducted by Hewitt among the 69 companies listed on the Irish Stock Exchange.

When performance-related bonuses and other variable pay elements are included, however, the average total remuneration for the highest paid director was €936,000, down 27% from the 2008 average of €1.3 million. The total annual reward ranges from €370,000 to €1.5m.

Finance directors’ total remuneration tends to be around 76% of their chief executive’s salary, while other directors’ total packages are usually 68%.

The average remuneration for a finance director was €715,000, down 31% from €1m in 2008. For other directors, the average total remuneration was €636,000, a drop of 21% from €800,000 in 2008.

Just over two in five companies operate a defined contribution pension plan, while 30% reported that they continue to operate a defined benefit plan.

In the defined contribution sector, despite a positive 2009, with average growth in assets of 20%, most members are still nursing losses of 15% to 20% in their pension accounts.

Managing director at Hewitt Kieran Barry said: “The impact of the financial crisis has been devastating on the finances of pension plans. At the end of 2009 pension deficits in ISEQ quoted companies operating defined benefit pension schemes represented approximately 14% of the total market capitalisation of those companies, or €6.3 billion.” He said some companies have “almost insurmountable funding challenges ahead”.

The average remuneration package for a non-executive chairman was €149,000, down from €161,000 in the previous year. One in four companies granted share options to their non-executive directors.

Mr Barry said: “Over the next 12 months, executive pay is likely to remain in the media spotlight. However, instead of incentive schemes which encourage undue risk taking, we are likely to see greater independence among remuneration committees, salary increases linked more to inflation and workforce settlements, stronger shareholders scrutiny of any bonuses paid, greater incorporation of risk management in pay policies, more alignment of pay policy with corporate strategy and a reduction in the historically high termination payments made to departed directors.”


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