New strategies emerging to curb fat cat pay
Executive pay reaching unsustainable levels
A survey by KPMG of compensation paid to executive directors of listed
companies has predicted that new strategies are set to replace current incentive
schemes.
The firm said the companies would increasingly turn to tailor-made executive
pay packages using a far wider range of performance measures
The firm said investors were becoming increasingly concerned that there is a
widespread failure to link remuneration strategies and performance to the actual
strategy of the business.
According to KPMG, the median take home pay of a FTSE 100 chief executive was
£2.3m in 2005, an increase of 9% above the median rate of increase on basic
salaries, which only rose by 6%..
Carl Sjostrom, a partner in KPMG’s executive compensation practice in the UK,
said:
‘We would argue that the signs we are seeing now – incentive awards approaching
maximum opportunity levels, together with pension short-falls being replaced
with cash payments alone, one-off incentives and companies testing private
equity type models in a quoted environment – are early indicators that a sea
change is about to happen.’
‘Companies will need to begin to design incentives that deliver higher pay
for some but in return for clear, robust linkages to the performance that drives
the long term value of the company,’ he added.