FD SALARIES - Financial disclosure

FD TOTAL PACKAGE

It was always one of the great ironies that no-one ever knew exactly how much Lord (Gordon) White was paid by Hanson plc to run its US business. Even in the pre-Greenbury era, his partner Lord Hanson’s salary was in the accounts for all to see, listed as that of the ‘chairman and highest-paid director’.

Not so with Lord White, who did not feature in the statutory table of directors’ salary bands. This was because he was not a director of the UK-registered parent company, nor of any UK-registered subsidiary. Lord White was only a director of the US business and, as thorough and demanding as US information disclosure requirements are, they do not yet insist that board members disclose their salary.

There are cultural reasons to explain this, and different ideas about board structure and purpose.

But the American omission underlines just how fortunate we are in the UK to have disclosure rules that allow investors to determine whether directors are earning their keep – or riding a gravy train. The problem is that too much of the debate tends to disintegrate into an envy-driven, headline-grabbing ‘fat cat’ slanging match.

Financial Director’s latest survey of FD salaries might be seen as adding fuel to the these flames – though its purpose is to shed more light than heat. First, some of the headline results:

The 1998 survey reveals that finance directors in FTSE-100 companies have seen their average pay-and-bonuses packages rise by 12.1% over the last year, to just under #395,000 – typically, two-thirds of that is salary, the rest is benefits and bonuses.

The highest-paid finance director is American Robert McCullough, who earned a basic salary and benefits package of just #183,000, but a #732,000 bonus took him to #925,000 last year. McCullough is the US-qualified FD of investment management group AMVESCAP, which was formed out of the merger between Invesco and AIM Global. This time last year, it was not a FTSE-100 company.

Sainsbury FD Rosemary Thorne had the biggest rise in total pay, with a #182,000 bonus helping to lift her total package by 80% to #426,000 – only about 8% more than that of the average FTSE-100 FD.

The survey should provide a little protection from the media for those FDs who work in the privatised utilities. The bottom quarter of the league table is dominated by FDs from the likes of Centrica, Railtrack and United Utilities. In fact, the FDs at Thames Water and Severn Trent are the two lowest-paid finance chiefs in the FTSE-100. Only one utility FD, Robert Brace at British Telecom, is paid an above-average salary package.

The survey also looked at how the FD’s salary compares with that of the highest-paid board member. Typically, the FD earns just over half – about 55% – of what his best-paid colleagues makes. This is an interesting measure, though it is too early to say which way it will move in future. While the changing and increasingly demanding role of the FD points to a gradual increase in coming years, it also shows the scope that remains for FDs who have their eye on the chief executive’s chair.

GOING UP – AND DOWN

How much are finance directors worth to their auditors? And how are they both performing when it comes to completing the annual accounts? See Auditors and their performance Source: Financial Director, October 1998. Andrew Sawers is editor of Financial Director, Accountancy Age’s sister publication