January 4th, 2013 / Insight posted in

Marketing Services sector – Quoted company director pay soars as private counterpart salaries plateau

Shareholders foot the bill for 11.4% increase in directors’ remuneration, while private business owners opt for sub-inflationary 2% rise

Quoted companies’ total director remuneration rocketed by 11.4% since last year, according to Kingston Smith W1’s Annual Survey for 2011, which analyses the financial performance of Marketing Services Companies. The survey also revealed that over half of the 11 quoted groups which suffered a fall in operating profit still increased the total directors’ remuneration in the year to 31 December 2010.

Meanwhile, directors of independent groups contained their own emoluments tightly in response to challenging conditions, demonstrating a sub-inflationary 2% increase in total directors’ remuneration, compared with a 9% growth in gross income and a total employment costs increase of 6%.

Furthermore, directors of quoted groups enjoyed pay increases which were larger on average than those of the main workforce, thus widening the pay gap between top earners and their staff. The highest paid director received an increase of 21%, a much higher figure than the 9% average increase in employment cost per head. While total headcount was cut back by seven of the quoted groups, six of those seven actually increased the amount awarded to the highest paid director.

In contrast, 10 of the top 50 independent groups reduced their total directors’ remuneration by more than 20%, while only two of them saw overall staff costs reduced by more than 20%.

Mandy Merron, lead partner at Kingston Smith W1, the leading marketing services and media accountants, comments: “Directors of quoted groups appear to be receiving pay rises based not on top performance, but rather on avoiding doing quite as badly as their competitors. Shareholders should expect their directors to be focused on absolute performance, rather than success relative to their peers.”

Merron further comments: “You only have to contrast this approach with that of directors running their own businesses, who have demonstrated a much more prudent and realistic approach to their company finances, awarding themselves a nominal 2% rise which, in real terms accounting for inflation, is a pay cut.”