Hewitt New Bridge Street research: recession’s impact on executive remuneration

Eighty percent of FTSE SmallCap companies responded to the economic downturn by freezing executive pay and reducing bonuses, concludes a series of reports on executive reward published by Hewitt New Bridge Street.

The report collates data published by companies in the FTSE SmallCap index, which comprises more than 250 businesses outside the FTSE 350 Index.

Rob Burdett, a principal consultant at Hewitt New Bridge Street, said: “[The economic downturn] has had a particular impact on SmallCap companies as they have seen cash flow dwindle and their financial security threatened.

“But it’s reassuring to see these companies taking swift and decisive action in relation to costs such as executive remuneration, which has been one of the most contentious topics of the past 18 months.”

Other highlights of the report included:

  • Median actual bonuses most recently disclosed were 25% of salary compared to 50% for the year before.
  • Sole operation of a performance share plan was the most common approach to long-term incentives at 25%, although 25% still operate option plans.
  • Earnings per share (EPS) and total shareholder return (TSR) remain the most common measures used in long-term incentive arrangements.
  • Defined contribution (DC) pension plans remain the most common approach for executive directors at 60%.
  • Variable pay such as annual bonus and long-term incentives accounted for around 40-45% of a typical executive director’s remuneration package.

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