IDS 374 l April 2012 Executive Compensation Review Strategic reward for managers and professionals MONITOR Findings of our nineteenth annual NHS boardroom pay report based on remuneration data drawn from the annual accounts of over 400 health trusts and boards in England, Scotland, Wales and Northern Ireland IN PRACTICE With major UK banks under scrutiny we take a look at what HSBC s latest annual report says about the remuneration of its directors and senior executives JOB MARKET With the UK retail sector facing tough times we take the temperature of the current job market for retail managers POLICY AND ANALYSIS We take the opportunity to see how top companies have responded to Lord Davies call to increase the number of women on UK boards SALARY SURVEY REVIEWS IDS z City earnings: City Pay Associates z Marketing professionals pay: Marketing Week and Ball & Hoolahan z Property professionals: RICS/Macdonald & Company www.incomesdata.co.uk
IDS Executive Compensation Review IDS Executive Compensation Review provides ongoing, up-to-date information on a monthly basis, on all aspects of pay practice for managers and professionals with guidance on market trends for specific job functions, new ideas in reward strategy, and the latest benchmarking data. Issue 374 April 2012 NEWS 2 Government consultation into shareholder voting rights launched No salary rises for pay review body public sector remit groups Robert Half monitors IT professionals Management salary awards running at 2.5 per cent, finds Croner Reward Plus NEWS IN BRIEF MONITOR NHS directors pay growth comes to a halt A review of the findings of our nineteenth annual NHS boardroom pay report based on remuneration data drawn from the annual accounts of over 400 health trusts and boards in England, Scotland, Wales and Northern Ireland IN PRACTICE HSBC reveals top executives pay Against a background of concern about banks not lending to small businesses and the mis-selling investment products, we take a look at what HSBC s latest annual accounts say about the remuneration of its directors and senior executives 4 10 IDS Executive Compensation Review ISSN: 1746-1847 Editor: Steve Tatton Researchers: Adam Cohen, Jessica Matthews, Nasreen Rahman To contact the IDS ECR team, please call: 0845 303 7218 Published by Incomes Data Services Ltd Finsbury Tower 103-105 Bunhill Row London EC1Y 8LZ Telephone: 0845 077 2911 Email: ids@incomesdata.co.uk Subscriptions: For enquiries and renewals, call Customer Services on 0845 600 9355 or visit www.incomesdata.co.uk. A subscription gives you 12 issues per year. A full index to the journal is available on the Executive Compensation Review section of www.incomesdata.co.uk. SURVEY ROUND-UP City earnings: City Pay Associates 14 Marketing professionals pay: Marketing Week and Ball & Hoolahan 15 Property professionals: RICS/Macdonald & Company 16 JOB MARKET Retail managers With the UK retail sector facing tough times we take the temperature of the current job market for retail managers POLICY & ANALYSIS Women on boards: a progress report On the first anniversary of the report by Lord Davies calling on top companies to increase the number of women on UK boards, we take the opportunity to see what progress has been made so far STATS & FACTS 25 17 21 www.incomesdata.co.uk IDS
News 2 News in brief New Lloyd s FD compensated for lost incentives Lloyd s Banking Group s incoming group finance director will receive 1.9 million on top of the normal pay package as part-compensation for forfeited deferred share awards and cash bonus following departure from the previous company. The new compensation package includes an annual salary of 720,000 and annual bonus worth up to 200 per cent of salary. It also includes a long-term share incentive of up to 225 per cent of salary and a pension cash allowance amounting to 25 per cent of salary. Company secretaries report board recruitment harder Just over half of company secretaries say their firms find it difficult to recruit board level candidates, according to the first ever FT-ICSA Business Bellwether survey. Covering 47 company secretaries from FTSE 350 companies, 86 per cent also thought that board positions, both executive and non-executive, carried a higher level of risk to a director s reputation than five years ago. Only 13 per cent thought that their company s board s conduct had changed since publication of the Financial Reporting Council Guidance on Board Effectiveness. ONS analyses graduate pay and employment Median earnings for graduates are 70 per cent higher than for nongraduates despite more working in lower skill jobs. These findings are included in a recent Office for National Statistics (ONS) analysis of graduate pay and employment. By degree subject, medicine and dentistry graduates had highest median hourly earnings of 21.29 compared with 12.06 for arts graduates. The analysis also found that over the past 10 years the proportion of recent graduates working in lower skilled jobs has increased to 35.9 per cent from 26.7 per cent. Government consultation into shareholder voting rights launched A further round of consultation on executive pay was launched this month by the Department for Business, Innovation and Skills (BIS). The latest consultation looks at measures to give company shareholders greater influence over executive pay through enhanced voting rights. Proposals covered by the consultation include: an annual binding vote on future remuneration policy; increasing the level of support required on such votes; an annual advisory vote on how pay policy was implemented in the previous year; and a binding vote on exit payments worth more than one year s salary. This follows on from January s announcement from the BIS that it intends to address failings in the corporate governance framework for executive remuneration (see Review 372, p.2). The January proposals included greater transparency over executive pay levels, giving shareholders a binding vote on executive pay packages and increasing diversity on board and remuneration committee. In response to the latest consultation, the CBI said it did not believe that binding shareholder votes were the right way to ensure that executive reward reflects performance. It was against the BIS s view that the level of shareholder support required for the approval of remuneration reports should be lifted up to 75 per cent of votes cast rather than a simple majority. The CBI said that raising the level of votes needed could leave decision-making in the hands of a minority of shareholders who may not represent the wider body of investors. The CBI, however, did agree that shareholder votes could be binding on general future remuneration policy rather than specific directors pay packages. Binding votes on specific pay packages, said the CBI, risked turning shareholders into micro-managers expected to second-guess executive decisions at every turn. More details of the BIS s consultation paper can be found at www.bis.gov.uk. No salary rises for pay review body public sector remit groups We are growing increasingly concerned that the morale and motivation of our remit groups is being adversely affected by the deterioration, both relative and absolute, in their terms and conditions. These concerns are expressed in the latest report from the Review Body on Senior Salaries (SSRB) published in March 2012. The SSRB is responsible for making pay recommendations for senior civil servants, judges, senior officers in the armed forces and very senior managers in the NHS. No pay recommendations were made for any of the remit groups due to the Government s pay freeze for public sector workers paid over 21,000 a year. The picture was the same for four other pay review body reports covering other key public sector groups. These included doctors and dentists, the prison service and other staff in the NHS and the armed forces. For public sector staff earning less than 21,000 a year, consolidated increases of 250 were recommended. As well as salaries, the review bodies were also asked to monitor recruitment, retention, motivation and other matters relevant to their remit groups. The SSRB pointed to evidence of a widening gap in remuneration between members of its remit group and comparators in the wider public sector and the private sector. The SSRB said that a perceived decline in the terms and conditions among its remit groups will lead to a fall in the quality and possibly the numbers of recruits, together with problems in retaining the best people. The SSRB also documented the real-terms cut in the take-home pay of its remit groups as a result of tax rises. According to its calculations, take-home pay in 2011/12 fell by between 11.5 per cent for a 4-star officer in the army and 18.7 per cent for a band 1 senior civil servant. The reports also show that bonus payments fell in value and that fewer senior civil servants received them. Bonuses were paid to less than a quarter of senior civil servants in 2010/11 which were worth just 2.8 per cent of the paybill. In contrast, recruitment and retention was less of a concern to the other review bodies. The Review Body on Doctors and Dentists Remuneration, for instance, said there continues to be a more than adequate supply of good quality applicants to study medicine. References: Pay Review Body reports are: England & Wales Prison Service 11 th Report; Senior Salaries 34 th Report; NHS 26 th Report; Armed Forces 41 st Report; Doctors & Dentists 40 th Report. Copies of all the review body reports can be downloaded free from the Office of Manpower website, www.ome.uk.com. IDS Executive Compensation Review 374 April 2012
News Robert Half monitors IT professionals There is an abundance of IT and technology roles but a shortage of skilled candidates, says recruiter Robert Half in its latest survey of the profession. Compiled over December 2011 and January 2012, its latest survey asked 100 chief information officers (CIOs) how challenging it is to find skilled IT professionals and the majority, 88 per cent, said recruitment is difficult. As can be seen in the table below, the survey also included an indication of the average starting salaries for IT professional roles. Overall, 50 IT roles were covered, with salaries ranging from IT starting salaries December 2011 to January 2012 starting salary Change on year 91,500 to 162,500 for CIOs and 20,500 to 33,500 for desktop support analysts. By region, average salaries in London were 15.7 per cent higher than the UK average, while salaries in Manchester and the North were 21.2 per cent lower than the UK as a whole. Compared with IT salaries in general, average IT salaries in financial services were 5 per cent higher in insurance and retail banking and 15 per cent higher in investment banking. Reference: 2012 salary guide: technology salary and hiring trends is available free to download at www.roberthalf.co.uk. starting salary Change on year Role Role Chief information officer 91,500-162,500 2.6 IT auditor 39,750-58,250 5.1 Director of IT 83,500-117,750 2.2 Database developer 37,250-57,750 5.8 IT manager/head of IT 74,000-104,500 1.9 Systems administrator 36,500-42,000 2.6 Infrastructure architect 52,250-65,000 4.0 Network manager 32,000-51,750 1.5 Network architect 43,000-64,500 2.6 Developer/programme analyst 31,750-58,500 4.0 Business inelligence analyst 42,750-52,250 5.6 Mobile applications developer 31,000-55,000 10.5 Security data analyst 41,250-50,500 6.1 Desktop support analyst 20,500-33,500 1.4 Source: Robert Half Technology Management salary awards running at 2.5 per cent, finds Croner Reward Salary awards for managers were running at a median 2.5 per cent during the four months to February 2011, according to the latest survey from Croner Reward. Based on data from 14,433 job recordings provided by 582 companies, the survey looks at management salary levels by industry, region and job function. A summary of Croner s pay findings by industry can be found in the table below. This shows that the highest median basic salary was in vehicles and parts at 43,955, some 24.3 per cent above the national average of 35,362. The lowest median salary of 26,390 was in timber and furniture, 25.3 per cent below the national average. Looked at by region, managers in Hertfordshire and Essex received the highest median basic salary at 39,499, some 12 per cent above the national average. In contrast, the lowest paying region was Northern Ireland where the median salary of 30,444 was 14 per cent below the national average. Reference: Management Rewards, March 2012 by Croner Reward. Contact customer services on (020) 8247 1175 or visit www.croner.co.uk. Price 360. Highest and lowest managers pay by industry at March 2012 (Source: Croner Reward) Highest paying Lowest paying Sector Median basic pay Comparison with average Sector Median basic pay Comparison with average Vehicles & parts 43,955 +24.3 Timber & furniture 26,390-25.3 Energy 43,826 +24.0 Clothing & footwear 30,000-15.1 Oil/gas extraction/ 39,996 +13.1 Education & health 30,509-13.7 process service Computer services 38,253 +8.2 Miscellaneous metal 30,628-13.4 goods Communications 37,143 +5.1 Charity 31,177-11.8 News in brief CEO tenure averages 6.4 years On average, the length of service of FTSE 350 chief executives (CEOs) is 6.4 years according to new Southampton University research. This contrasts with a 2008 figure cited in the report showing the average tenure was 3.3 years. Given its finding, the report questions whether high levels of remuneration are really keeping people in post, or if the impetus to move isn t as strong as perceived. The report also found that highest company share price growth was associated with those CEOs in place for more than ten years. Job market improving says Manpower Manpower s latest employment outlook suggests that there is likely to be a small increase in job creation during the second quarter of 2012. Based on responses from 2,101 employers, there was an increase in the proportion of respondents predicting that they would be hiring new staff over the three months to the end of June 2012. Despite the positive figures, 82 per cent of employers say they do not anticipate hiring any new employees. By sector, employers in utilities were most positive with a net employment outlook of plus 13 per cent. New figures on UK share ownership Increased foreign ownership of UK companies shares may have important ramifications for the corporate governance regime, says shareholder consultancy PIRC. PIRC was responding to new Office for National Statistics share ownership figures, which show that overseas investors owned 41.2 per cent of the UK stock market by value in 2010, up from 30.7 per cent in 1998. During the period, UK equities held by individuals dropped from 16.7 per cent to 11.5 per cent. PIRC is concerned that overseas investors may consider UK executive pay reasonable when compared with their own countries. IDS Executive Compensation Review 374 April 2012 3
Monitor NHS directors pay growth comes to a halt Findings from the survey Pay freezes were widespread across the UK s salary rises were slightly higher than the medians, running at 1.6 per cent in English non-pcts; 1 per cent in PCTs; 1.7 per cent in Scotland; 2.1 per cent in Northern Ireland At 1.7 per cent, the average salary increase for foundation trust directors was slightly higher than for their nonfoundation counterparts In both foundation and non-foundation trusts, median total earnings for chief executives came to 157,500 PCT chief executives had a median salary of 137,500 and median total earnings of 142,500 In Northern Ireland, Health and Social Service chief executives had a median salary of 107,500, while rates in Welsh and Scottish Health Boards were 187,500 and 152,500 By trust size, the median earnings of English trust chief executives varied from 124,950 to 191,800 West Hertfordshire Hospitals NHS Trust s chief executive was the highestpaid, with total earnings of 282,500 Of English trusts, the lowest-paid chief executive was at Royal National Hospital for Rheumatic Diseases with total remuneration of 87,500 Finance directors were the highest paid board members with median remuneration ranging from 97,500 in care trusts to 127,100 in acute and specialist trusts In English NHS trusts, the rate of turnover of board directors increased over the year, running at 23.6 per cent in NHS trusts and 25.5 per cent in PCTs Foundation trust non-executive directors mid-point fees stood at 12,500 compared to 7,500 in nonfoundation trusts Median fees for foundation and nonfoundation non-executive chairs were 42,500 and 22,500 respectively Since being elected in 2010, the coalition Government has been bearing down on senior executive pay in the public sector, seeking to reverse the upward trend of the previous decade. For nearly 20 years we have been monitoring NHS boardroom pay and our latest report suggests that those at the top have responded to calls for restraint. We are living in a time of austerity and it seems senior executives in the NHS have not escaped the squeeze. This is the picture painted by our NHS boardroom pay report 2012, which finds that pay movements at senior levels in the sector are the most restrained for nearly two decades. Based on an analysis of the latest available annual accounts, the report shows that the salaries of a matched group of English NHS trust chief executives were unchanged at the median during the year to 31 March 2011. By contrast, the average salary rise was only 1.6 per cent, with little difference apparent between foundation and non-foundation trusts. At the same time as salaries are being frozen, the turnover rate of board members remains high as the impact of service reorganisations and cost cutting feed through to management structures. As in all our previous NHS boardroom pay reports, our nineteenth edition is based on information published in the most recent annual reports and accounts. All the latest accounts had year-end dates of 31 March 2011 and, in total, we collected pay details for 2,196 full-time, full-year directors from the accounts of 408 English, Welsh, Scottish and Northern Irish trusts and health boards. Because of limitations in NHS disclosure regulations, the pay information collected is not always the exact amount received by post-holders. Under existing rules, trusts are only obliged to disclose how much directors were paid within a 5,000 range and where these were provided we took the mid-point as the postholder s representative salary. Service reorganisation continues Every year, it seems, our survey of NHS boardroom pay takes place against a background of reorganisation and our latest report is no exception. In England, significant changes are underway with the Government pressing ahead with its intention to abolish primary care trusts (PCTs) and replace them with GP-led commissioning consortia. While PCTs remain for now, they have been subject to extensive reorganisation in preparation for the expected change. But NHS reorganisation is not confined to PCTs as the Government wants to see all English NHS trusts gain foundation status by 2013/14. As a consequence, our latest report registered a further increase in the number of foundation trusts. Outside England, the trend has been to consolidate service delivery. Health Table 1: Hospital trust and PCT non-medical executive directors salary increases in England 2010/11 (Source: ECR) Lower quartile Upper quartile Median Trust type No. Foundation trusts 374 0.0 0.0 3.7 1.7 Non-foundation trusts 285 0.0 0.0 4.1 1.4 All non-pcts 659 0.0 0.0 3.8 1.6 All PCTs 383 0.0 0.0 0.0 1.0 4 IDS Executive Compensation Review 374 April 2012
Monitor Whatever the pay arrangements covering NHS senior executives, across the UK all are united in facing downward pressures on salary awards. boards dominate in Scotland and Wales, while in Northern Ireland health and social service (HSS) trusts have been amalgamated. All these variations shape both how and how much NHS senior executives are paid across the UK. In England, foundation trusts have autonomy over how much they reward their executives with decisions made by an independent remuneration committee. English PCTs, on the other hand, are covered by a national pay framework that specifies centrally how much directors should be paid. In contrast, the devolved governments of Scotland, Wales and Northern Ireland have much more of a say over NHS executive remuneration and, like PCTs in England, there are formal pay frameworks. Salaries remain static Whatever the pay arrangements covering NHS senior executives, across the UK all are united in facing downward pressures on salary awards. This is illustrated in table 1, which shows the changes in the mid-point salaries of a matched group of non-medical executive directors in English NHS trusts who have been in post for two full years. At the median, it can be seen that mid-point salary increases were running at zero across all types of trust. The average rises, on the other hand, were positive, but still relatively low, ranging from 1 per cent in PCTs to 1.7 per cent in foundation trusts. Outside England the picture was similar. Although the number of senior executives is significantly smaller than in England, the salary rises were equally restrained. The median salary movements for non-medical directors in both Scotland and Northern Ireland were zero, while the corresponding average rises were 1.7 per cent and 2.1 per cent. In contrast, little can be said about pay movements in Wales as almost every NHS organisation underwent major reorganisation during the 2009/10 financial year. As a consequence, it is not sensible to make pay increase comparisons over two years as roles and responsibilities have changed significantly....chief executives are not always the highest-paid on NHS boards as in some trusts the earnings of medical directors overshadow the top job. Executive directors pay in England What impact the latest pay movements had on compensation levels in England can be seen in table 2, which gives a summary of our median salary and total earnings findings for selected executive board positions across different types of NHS trust. Where performance payments have been awarded, these may be included in salary, while total earnings add in benefits along with any other related cash amounts. The table shows that median total remuneration of chief executives varied from 122,500 in care trusts to 167,500 in acute and specialist trusts. As the table indicates, however, chief executives are not always the highest-paid on NHS boards as in some trusts the earnings of medical directors overshadow the top job. In addition to chief executives and medical directors, table 2 also shows the median pay levels for a number of other board positions, including finance, nursing, human resources and operations directors. Of these, finance directors were the highest paid, no doubt reflecting the growing importance of the role as individual trusts have become more financially accountable. At the other end of the spectrum, however, the picture was not so clear cut. Strategy/corporate development directors were the lowest paid in acute and ambulance trusts, while IDS Executive Compensation Review 374 April 2012 5
Monitor Indexed median salary levels of chief executives by non-pct income 2010/11 Trust income Index Over 400m 120.6 250m to 400m 112.7 200m to 250m 101.6 All 100.0 150m to 200m 93.7 125m to 150m 90.5 100m to 125m 85.7 Under 100m 77.8 Source: ECR in the three other trust types the lowest paid were facilities, human resources and service development/delivery/improvement directors. Compared to NHS trust chief executives, their PCT counterparts are less highly rewarded. As table 2 shows, the median salary for PCT chief executives was 137,500, some 20,000 lower than the corresponding NHS trust figure. Excluding medical directors, the pattern is evident for other board positions, with the median PCT salaries shown in table 2 some 11.5 per cent lower on average. In part, these differences may be explained by the tighter constraints on PCT pay levels which are governed by a nationally-determined very senior management (VSM) pay framework. This framework also extends to ambulance trusts and strategic and special health authorities. Trust size and region key factors shaping pay Trust type is not the only factor shaping NHS senior executive pay levels in England. Organisation metrics such as population served, income and employee numbers also play a role in determining how much is paid to trust directors. An indication of the relationship between non-pct organisation size, as measured by trust income, and median chief executive salaries can be seen in the margin table. For comparison purposes, the salary figures have been indexed against the all non-pct chief executive median. As in previous years, the table shows a close match between trust income and salary levels. Another way of looking at patterns of pay is by location and the second margin table on page 7 plots the median total remuneration of English non-pct chief executives by region, which again has been indexed against the national figure. Surprisingly, the highest-paid chief executives, with median total remuneration of 182,500, were in the North East. This was ahead of South Central and London-based chief executives with median total remuneration of 162,500 and 160,000 respectively. In contrast, Table 2: Median pay levels of English Hospital trust executive directors by trust type 2010/11 (Source: ECR) Acute and specialist Mental health All hospital trusts Primary care trusts Ambulance Care Board position Chief executive Basic salary 167,500 137,500 122,500 147,500 157,500 137,500 Total remuneration 167,500 142,300 122,625 148,650 157,500 142,500 Facilities director Basic salary 102,500-97,500 95,000 97,500 87,500 Total remuneration 102,500-97,500 95,100 97,950 87,500 Finance director Basic salary 125,000 100,000 97,500 112,500 117,500 102,500 Total remuneration 127,500 102,500 97,500 112,500 117,500 107,200 HR director Basic salary 97,500 90,000 85,000 97,500 97,500 82,500 Total remuneration 98,000 95,300 86,050 97,500 97,500 86,100 Medical director Basic salary 82,500 98,750 87,500 92,500 87,500 105,000 Total remuneration 180,000 103,300 135,000 170,000 176,250 111,400 Nursing director Basic salary 102,500 100,000 87,500 97,500 101,500 90,000 Total remuneration 102,850 100,485 87,500 97,500 102,500 91,250 Operations director Basic salary 112,500 93,750 97,500 97,500 107,500 92,500 Total remuneration 112,500 95,750 97,500 102,500 107,500 92,500 Service development/delivery/ improvement director Strategy/corporate development director Basic salary 100,250 92,500 77,500 97,500 97,500 87,500 Total remuneration 105,000 98,500 80,300 98,500 98,500 91,000 Basic salary 97,500 91,250 92,500 97,500 97,500 92,500 Total remuneration 97,500 94,350 92,500 99,250 97,500 92,500 6 IDS Executive Compensation Review 374 April 2012
Monitor Indexed median total remuneration of English non- PCT chief executives by region 2010/11 Region Index North East 119.8 South Central 103.2 London 101.7 East Midlands 101.3 All 100.0 East of England 99.7 South East Coast 98.8 North West 96.8 West Midlands 93.7 Yorkshire and the Humber 93.0 South West 92.1 Source: ECR Foundation trust status brings with it greater managerial and financial autonomy and with this greater freedom comes increased scope to set the remuneration of directors. the lowest paid post-holders were in the South West, where earnings amounted to 142,500. Trust size probably explains most of the regional differences, with the lowest-paying trusts found in the least populated areas. Foundation and non-foundation trusts But such comparisons mask one of the key developments in NHS organisation over the last few years in England the growth of foundation trusts. Foundation trust status brings with it greater managerial and financial autonomy and with this greater freedom comes increased scope to set the remuneration of directors. How this greater freedom has translated into remuneration levels can be found in table 3, which shows the pay gap between foundation and non-foundation trusts. From the table it can be seen that the median salary for foundation trust chief executives was 157,500, some 2,500 or 1.6 per cent more than the nonfoundation equivalent of 155,000. When other earnings were taken into account, however, the differential disappears with both medians standing at 157,500. Of the other job titles featured in table 3, the most significant foundation trust salary differential was at finance director level, where the median, at 117,500, was some 4.4 per cent greater than the corresponding non-foundation figure of 112,500. But while table 3 indicates that the pay of foundation trust directors tends to be higher, it is not straightforwardly explained by the usual factors such as organisational size. Analysis by trust income, for example, shows that even in similar-sized organisations foundation trust chief executives tend to earn more than their non-foundation counterparts. Longer-term pay growth halted Comparisons like those between foundation and non-foundation directors only give a static picture of current pay levels, but the coalition Government has expressed its concern about a more long-term trend, the widening earnings gap Table 3: Median pay levels of foundation and non-foundation trust executive directors 2010/11 (Source: ECR) Nonfoundation Board position Foundation Differential Chief executive Basic salary 157,500 155,000 1.6 Total remuneration 157,500 157,500 0.0 Facilities director Basic salary 97,500 102,500-4.9 Total remuneration 97,700 102,500-4.7 Finance director Basic salary 117,500 112,500 4.4 Total remuneration 119,600 112,500 6.3 HR director Basic salary 97,500 97,500 0.0 Total remuneration 97,500 97,500 0.0 Medical director Basic salary 82,500 87,500-5.7 Total remuneration 180,200 170,000 6.0 Nursing director Basic salary 102,500 97,750 4.9 Total remuneration 102,550 101,250 1.3 Operations director Basic salary 107,500 105,000 2.4 Total remuneration 107,500 107,150 0.3 Service development/ Basic salary 97,750 92,500 5.7 delivery/improvement director Total remuneration 98,750 98,500 0.3 Strategy/corporate development director Basic salary 97,500 97,500 0.0 Total remuneration 98,600 97,500 1.1 IDS Executive Compensation Review 374 April 2012 7
Monitor...the median total earnings of NHS trust chief executives in England increased between 1997 and 2009, by some 115 per cent. But as the clamp-down on public sector pay took hold in 2010, earnings growth decelerated and then reversed... between top public sector executives and the rest of the workforce. Certainly, our own NHS boardroom pay research has tracked how the remuneration of trust directors in England has seemingly escalated since the early 1990s. But our latest report suggests that the steady growth of pay at the top in the NHS has come to halt, at least for now. This is clearly illustrated in graph 1, which plots our NHS trust chief executive median total remuneration results at March each year from 1997 to 2011. Although these figures are based on unmatched groups of directors, unlike our annual pay movement findings, they do illustrate how the rate for the job has changed over the longer term. To put our chief executive figures in a wider context, the graph also includes the median gross full-time weekly earnings of selected comparative occupational groups: female nurses; male nurses; all public sector employees and all private sector employees. The all-employee statistics are taken from the Annual Survey of Hours and Earnings (ASHE) published each year by the Office for National Statistics and for ease of comparison all the earnings figures have been indexed. From the graph, it can be seen how sharply the median total earnings of NHS trust chief executives in England increased between 1997 and 2009, by some 115 per cent. But as the clamp-down on public sector pay took hold in 2010, earnings growth decelerated and then reversed, with median total remuneration for NHS chief executives actually lower in the latest report compared to the previous year. But this should not be interpreted as an indication that some chief executives took a pay cut during the year as it is based on an unmatched comparison. Rather, it indicates that those remaining in post are earning less than those who were in post during the previous year, suggesting that it is the rate for the job that has declined. It remains to be seen whether this is a temporary blip in response to current circumstances or the start of a longer term trend. Staff turnover and redundancies One of the factors affecting our latest median earnings figure in the graph is the high level of turnover at board level, with large numbers of directors joining, Graph 1: Indexed median earnings of NHS trust chief executives compared to national earnings 1997 to 2011 (Source: ECR) 235 215 NHS chief executives 195...those remaining in post are earning less than those who were in post during the previous year, suggesting that it is the rate for the job that has declined. Index (1997 = 100) 175 155 135 115 95 1997 1998 1999 2000 2001 2002 2003 2004 2005 Female nurses 2006 2007 2008 2009 2010 Male nurses All public All private 2011 8 IDS Executive Compensation Review 374 April 2012
Monitor Analysis of board level turvnover in all English trust types 2010/11 Trust type Total number of directors Proportion starting* Proportion leaving* Non-foundation 638 29.5 32.1 trusts Foundation 968 17.6 17.0 trusts All non-pcts 1,606 22.7 23.6 All PCTs 1,278 21.6 25.5 All English 2,884 27.5 24.3 trusts *Based on the midpoint of the total number of directors and the number in post for the full year leaving or being made redundant. This is a reflection of the ongoing reorganisation of the NHS in England along with the continuing pressure to reduce costs and increase efficiency. Just how high the turnover of NHS board members was last year can be seen in the margin table, which measures the proportion of directors leaving and joining each type of trust in England. Excluding those who have retired and other good leavers, the table shows the proportion of directors starting and leaving across three types of NHS organisation was running at nearly a quarter, although there were variations. The proportion of directors leaving nonfoundation trust boards during the year, for example, was markedly high at 32.1 per cent. In contrast, the comparable rate in foundation trusts was relatively low at 17 per cent. Less surprising, given the extensive restructuring that has taken place, the proportion of directors leaving PCTs was also notably high at 25.5 per cent. Compared to 2009/10, it seems that, with the exception of foundation trusts, turnover rates at board level in the NHS went up a further notch in 2010/11. Scotland, Wales and Northern Ireland Outside England, different arrangements govern the way directors remuneration is determined and NHS structures are more settled following a wave of earlier reorganisations. As table 4 shows, of the three countries, the highest paid chief executives, with a median salary of 187,500, were in Wales, although some caution is needed when interpreting this figure as it is based on a small sample. Welsh trusts have undergone major changes since last year resulting in larger organisations pushing their rates to the top of the UK pay league. The Welsh figure is higher than the English equivalent 157,500, while the corresponding medians for chief executives in Scotland and Northern Ireland were 152,500 and 107,500 respectively. The proportion of directors leaving non-foundation trust boards during the year...was markedly high at 32.1 per cent. Table 4: Median pay of selected directors in Wales, Scotland and Northern Ireland 2010/11 (Source: ECR) Wales Scotland Northern Ireland Median Median Median Chief executives Basic salary 187,500 152,500 107,500 Total remuneration 188,300 152,500 108,500 Finance directors Basic salary 132,500 107,500 82,500 Total remuneration 132,500 109,300 85,200 Human resources directors Basic salary 127,500 102,500 82,500 Total remuneration 127,500 105,600 83,200 Medical directors Basic salary 157,500 172,500 165,000 Total remuneration 179,750 172,500 165,000 Nursing directors Basic salary 127,500 107,500 72,500 Total remuneration 127,500 109,000 73,750 Operations directors Basic salary 112,500 135,000 57,500 Total remuneration 120,500 135,050 60,000 Planning directors Basic salary 127,500 132,500 87,500 Total remuneration 129,000 132,500 87,500 Public health directors Basic salary 97,500 172,500 - Total remuneration 97,500 173,550 - Strategy directors Basic salary 120,000 132,500 72,500 Total remuneration 122,300 136,400 72,500 IDS Executive Compensation Review 374 April 2012 9
In practice HSBC reveals top executives pay Performance is judged not only on what is achieved over the shortand medium-term, says the bank, but also on how it is achieved. Performance achievement of chief executive in 2011 Maximum Financial targets potential Actual achievement Capital 10 Fully achieved strength Dividend 10 Fully achieved Profit 10 Half achieved Cost 10 Half achieved reduction Return on 5 Not achieved equity Return 5 Not achieved on riskweighted assets Non-financial targets Strategy and 25 20 achieved execution People and 10 75 achieved values Compliance 15 Not achieved and reputation Source: HSBC Annual Report Banks are under increasing pressure to appease investors, politicians and regulators about the sums paid to top executives, especially in a climate of concern about insufficient lending to small businesses and fines for mis-selling of investment products. It is against this background that HSBC has published its full annual report and we take the opportunity to see what it says about executive remuneration. We ensure our remuneration policies are aligned with both new regulatory practices and the interest of shareholders and confirm that HSBC is fully compliant with the Financial Stability Board and Financial Services Authority (FSA) guidance and rules on remuneration. This is the regulatory environment that HSBC explains has shaped it decisions about boardroom and senior executive pay in the last year. As a result, HSBC is the first major bank to comply with new Treasury requirements to publish the remuneration details of the top eight highest-paid non-board executives. At board level, executive directors have had their bonus entitlements reduced and a bonus claw back was applied to other senior executives as a penalty for mis-selling financial products. Other major features of HSBC s remuneration policies this year are the introduction of a new group performance share plan (GPSP) and a performance scorecard for both short- and long-term incentives. HSBC is one of the UK s major clearing banks with a worldwide presence in 87 countries and serving 100 million customers. Across all its businesses, the bank employed some 305,984 staff in 2011, of which 81,263 were in Europe. Given this worldwide profile, the group chief executive is now based in Hong Kong, although the bank s headquarters remains in London. As well as being listed on the London Stock Exchange, it also quoted on the Hong Kong, New York, Paris and Bermuda stock exchanges. Although financial performance in 2011 improved compared with the previous year, the bank s reputation was set back when the FSA fined a substantial sum for mis-selling insurance products to elderly customers. Remuneration policy HSBC s current reward strategy is to focus executive compensation on variable pay to ensure alignment between senior remuneration and company strategy and to enhance shareholder value. Performance is judged not only on what is achieved over the short- and medium-term, says the bank, but also on how it is achieved. To maintain clarity over remuneration, executive director compensation at HSBC is now limited to four components, two of which are performance-related. These are: z basic salary; z benefits and allowances; z the annual bonus, including cash and deferred shares; z a new long-term incentive plan, the GPSP. Directors also receive pension contributions, but arrangements are mixed. There are contributions to personal pensions, cash paid in lieu of pensions and one director remains a member of a final salary scheme. The benefits received include the taxable rental value of accommodation in Hong Kong for the chief 10 IDS Executive Compensation Review 374 April 2012
In practice Emoluments of the 5 highest paid employees (excluding pension) for the year ended 31 December 2011 Basic salaries, allowances and benefits in kind Bonuses paid or receivable Inducements to join paid or receivable 5 highest paid employees (aggregates) per employee 5,244,000 1,048,800 20,193,000 4,038,600 1,892,000 378,400 Total 27,929,000 5,465,800 Source: HSBC Annual Report Following substantial salary increases in 2010 and at the beginning of 2011, the bank says there will be no rises to executive directors base pay in 2012. executive and a relocation payment for moving back to London for the group finance director. When benchmarking top remuneration packages, a defined group of comparator companies is used. The group consists of nine global financial services firms, including Santander, Bank of America, Barclays, Citigroup, JP Morgan Chase, Standard Chartered and UBS. A full breakdown of the remuneration received by the three current executive board directors, as disclosed in the latest annual accounts covering the year to 31 December 2011, is given in table 1. Following substantial salary increases in 2010 and at the beginning of 2011, the bank says there will be no rises to executive directors base pay in 2012. Annual bonus details Under current arrangements, the maximum bonus opportunity for directors is 300 per cent of salary, which is lower than the previous ceiling of 400 per cent. Bonus payouts are split, with 40 per cent normally paid in cash and 60 per cent awarded as deferred shares. In 2011, however, the whole bonus was paid in shares and 50 per cent of both the non-deferred and deferred awards are subject to a six-month retention period after vesting in line with FSA regulations. Vesting of the deferred shares is staggered over three years, with 33 per cent released on the first and second anniversaries from the date of grant and 34 per cent on the third. During the vesting period the remuneration committee has the authority to claw back part or all of the award. An indication of the value of the bonus payments received during the latest year is given in table 1. Bonus payouts in 2011 were based on the achievement of financial and nonfinancial targets. The targets are linked to a newly introduced performance scorecard, but its weighting in the overall bonus varies for each director. For the chief executive, for example, the financial and non-financial weighting in 2011 was 50 per cent each. In the latest accounts, more detail was disclosed on actual bonus performance than ever before. This shows that the chief executive s scorecard included nine performance targets and details of these, along with an indication of how far they were achieved, are shown in the margin table on page 10. In the 2011 performance year, the chief executive fully met two of the nine targets and partially Table 1: Remuneration levels of board directors at HSBC for year ended 31 December 2011 (Source: ECR) Group chief executive Director and chairman of Europe, Latin America and commercial banking Group financial director Salary 1,250,000 975,000 700,000 Allowances 527,000 366,000 364,000 Benefits in kind 266,000 237,000 363,000 Annual bonus cash 2011 862,000 770,000 434,000 (deferred in shares for 6 months) Annual bonus deferred 2011 1,294,000 1,156,000 652,000 Past bonuses vested in 2011 4,559,000 1,627,000 446,000 HSBC Share Plan 98,000 226,000 - Total compensation 8,856,000 5,357,000 2,959,000 Maximum bonus potential (3x salary) 3,750,000 2,925,000 2,100,000 GPSP (contingent on future 2,332,000 1,061,000 652,000 performance) Indicative total earnings* 7,332,000 4,961,000 3,452,000 * Based on 2011 basic pay IDS Executive Compensation Review 374 April 2012 11
In practice The emoluments of the five highest paid employees were within the following bands at 2011 Number of employees 3,900,001-4,000,000 1 4,200,001-4,300,000 1 4,300,001-4,400,000 1 7,100,001-7,200,000 1 8,000,001-8,100,000 1 Source: HSBC Annual Report met four. Three targets, however, were not met, one of which was compliance and reputation. This measure took into account the FSA s mis-selling judgement and as a result part of the award was not made under this target. On the basis of 2011 performance, the chief executive s total bonus was worth 57.5 per cent of the maximum available. Of this, 27.5 per cent was due to nonfinancial achievement and 30 per cent to financial performance. Although full bonus performance details are not given for other directors, the maximum weighting for the chairman of Europe, Latin America and commercial banking was 45 per cent financial and 55 per cent non-financial, while actual achievement was two-thirds of the total. Similarly, the performance scorecard for the group finance director was 40 per cent financial and 60 per cent non-financial but an overall score of 52 per cent was achieved. Since no board director was judged to have fully met all targets, the final bonus awards in 2011 were worth: z 1.72 times salary for the group chief executive, or 2,156,000; z 2.98 times salary for the chairman of Europe, Latin America and commercial bank, or 1,926,000; z one times salary for the group finance director, or 1,086,000. To give an indication of what directors could potentially receive, table 1 also includes an estimate of the maximum bonus opportunity plus the face value of share grants in 2012, in an indicative total earnings figure. Group performance share plan In addition to short-term incentives, executive directors also participate in a long-term share-based scheme. Approved by shareholders in 2011, a key feature of the new long-term GPSP is that once awards vest, participants must keep their shares until retirement. The maximum face value of the GPSP award for the chief executive is 600 per cent of salary, which is lower than the 700 per cent ceiling under the previous scheme. The maximum for the group finance director is 200 per cent of salary. All shares are subject to a five-year vesting period, during which the committee has the authority to claw back some or all the award. Like the annual bonus scheme, performance is measured against a combination of Table 2: 2011 GPSP scorecard and performance outcome and 2012 weightings (Source: HSBC Annual Report) Long-term target range 2011 Weighting Actual 2011 performance Measure Outcome Financial Return on equity 12-15 15 10.0 Not achieved 15 Cost efficiency ratio 48-52 15 57.5 Not achieved 15 Capital strength More than 10 15 10.1 15.0 - achieved 15 Dividends (payout ratio) 40-60 15 42.4 15.0 - achieved 15 Non-financial Strategy Judgement 10 Judgement 7.5 - three-quarters achieved Brand equity Top 3 ratings and improve 10 Top 3 rating but 5.0 - half achieved 5 US $bn value drop in value (1) Compliance and Judgement 10 Not achieved Not achieved 10 reputation People and values Judgement 10 Judgement 7.5 - three-quarters 5 achieved Performance outcome 100 50.0 100 Notes: (1) Based on results from The Brand Finance Banking 500 2012 survey 2012 scorecard weighting 20 12 IDS Executive Compensation Review 374 April 2012
In practice Aggregate emoluments of senior management for the year ended 31 December 2011 Number of senior managers 0-1,000,000 2 1,000,001-2,000,000 1 2,000,001-3,000,000 3 3,000,001-4,000,000 8 4,000,001-5,000,000 1 7,000,001-8,000,000 1 8,000,001-9,000,000 1 Source: HSBC Annual Report financial and non-financial scorecard targets. But unlike the annual bonus, the scorecard metrics for the GPSP are the same for all directors. The financial targets account for 60 per cent of the award and the non-financial measures for 40 per cent. The performance scorecard range, weighting and outcomes are given in table 2. This shows that in 2011 there were four financial targets, each with a 15 per cent weighting, while each non-financial measure has 10 per cent weighting. Unusually, under the GPSP, the value of initial share grants at the start of a performance cycle is linked to an assessment of prior-year performance. On this basis, it was judged that instead of the maximum grant of 600 per cent of salary possible, the chief executive received an initial award in 2011 of 300 per cent and the group finance director 100 per cent. Also in 2011, two directors received payouts from the previous long-term incentive, the HSBC share plan, worth 98,000 for the chief executive and 226,000 for the director and chairman of Europe, Latin America and commercial banking (see table 1). Disclosure of other executives pay HSBC s remuneration disclosure this year was not confined to board directors. Arising out of Project Merlin, the Treasury proposed that the UK s largest banks should publish the pay details of the eight highest-paid non-board senior executives, although they were not required to reveal job titles or names (see Review 372, p. 2). This proposal has not yet been finalised, but HSBC has anticipated the change and published pay details in line with the recommendation. The remuneration information disclosed is given in table 3, which shows that the highest-paid nonboard executive received 7.1 million in total. This was higher than the chief executive s comparable total of 4.3 million. As well as an annual salary of 650,000, the highest-paid executive received shares worth 1.8 million subject to a six-month retention period and deferred shares worth 2.7 million. Conversely, the lowest-paid executive in table 3 received 2.5 million in remuneration, consisting of a salary of 624,000 and an annual bonus totalling 748,000. Additionally, HSBC also set out the aggregate pay details of the five highest paid individuals (see margin table on page 11) as well as in bands of 100,000. As the margin table on page 12 shows, the highest of the five individuals earned between 8 million and 8.1 million and the lowest earned just under 4 million. Additionally, HSBC also gives the aggregate emoluments of senior management earning above 1 million. As the margin table documents, eight executives earned between 3 million and 4 million. Table 3: Remuneration of eight highest paid senior executives at HSBC for year ended 31 December 2011 (Source: HSBC Annual Report) Individual 1 Individual 2 Individual 3 Individual 4 Individual 5 Individual 6 Individual 7 Individual 8 Cash based pay 650,000 623,000 650,000 650,000 654,000 650,000 481,000 624,000 Cash bonus (1) - 375,000 - - 493,000-271,000 374,000 Non-deferred shares 1,812,000 375,000 451,000 717,000 493,000 570,000 271,000 374,000 (2) Deferred cash - 563,000 - - 740,000-407,000 562,000 Deferred shares 2,718,000 563,000 677,000 1,076,000 740,000 854,000 407,000 562,000 Total cash 5,180,000 2,499,000 1,778,000 2,443,000 3,120,000 2,074,000 1,837,000 2,496,000 LTIP (GPSP) 1,950,000 1,250,000 1,950,000 975,000-975,000 724,000 - Total remuneration 7,130,000 3,749,000 3,728,000 3,418,000 3,120,000 3,049,000 2,561,000 2,496,000 Notes: (1) annual bonus in respect of performance year 2011 (2) For UK based employees 50 of the awards vested are subject a 6 months retention period. IDS Executive Compensation Review 374 April 2012 13
Survey round-up Survey details Title: City Pay Guide Producer: City Pay Associates Data at: December 2011 Source and coverage: Data on around 400 jobs in 19 business or functional areas from Definitions: around 140 organisations based in London. Participants are small to medium sized international Enquiries: and commercial and investment banks, private banks, fund and asset management companies, Price: stockbrokers, commodity traders and other finance related organisations. Definitions: Basic salary is total fixed pay including any fixed annual location weighting and does not include benefits. Total cash is basic pay plus any annual cash bonus awarded in the past 12 months excluding allowances. Any deferred element of the bonus, share options and long-term incentives are not included. Enquiries: City Pay Associates Limited, 26 Bardfield Centre, Great Bardfield, Braintree, Essex CM7 4SL. Tel: (01371) 810979. Email: info@citypay.co.uk Price: Three editions a year, 1,300 for survey participants and 3,750 for non-participants. For a single edition, 495 for survey participants and 1,495 for nonparticipants. 14 City earnings: City Pay Associates Both bonuses and pay awards in the City picked up last year and look set to be running at the same levels during the first quarter of 2012. These are the findings of the latest survey of London-based finance sector professionals pay by City Pay Associates (CPA). The survey, which concentrates on those working for small-to medium-sized firms, is based on data collected during the last quarter of 2011. Across all 140 participating organisations, says CPA, pay budgets increased by 4 per cent at the median in 2011, but rises varied between zero in other financial institutions to 5 per cent in investment banks/companies. Looking ahead, a third of participants indicated that reviews from January through to April 2012 would be running between 3.5 per cent and 4 per cent. Giving more background, the survey says that the significant salary increases reported by bigger investment banks now seem to be impacting on base pay levels in small-to medium-sized organisations. The rises, however, are largely limited to key staff rather than back office employees. Key individuals in front office roles, including relationship management, business development, capital markets and specialised finance, have received base pay increases worth over 30 per cent. Pay level findings In the survey, salary level details are given for almost 400 job titles across 19 functions, including commodities and futures, credit and banking, capital markets and specialised finance. An overview of the salaries for a selected number of senior jobs can be seen in the table below. Heading the table is chief executive/md with a median salary of 300,000. The median salaries for directors of private banking and chief FX dealers were more modest at 114,800 and 111,985 respectively. Not shown in the table are salary levels for less senior roles and back office functions like HR, information technology and legal. The median salary for human resources directors was 105,600, while for heads of European information technology the figure was 141,680. Bonus payments Also shown in the table is the median value of the bonuses received by each of the selected jobs expressed as a percentage of salary. These range from 18.2 per cent for chief FX dealers to 92.7 per cent for heads of capital markets. Across all participants, the bonuses paid to executive managements and front office staff were worth 26.3 per cent at the median, while for management, back office and support employees the equivalent figure was 12.9 per cent. Over the last year, says CPA, there has been a small increase in the number of companies introducing deferred bonuses, but the number receiving deferred bonuses remains small. Basic salary and bonus levels for selected City specialists at fourth quarter 2011 (Source: City Pay Associates) Lower quartile Upper quartile Median bonus as a of salary Median Position Chief executive/md 251,873 300,000 364,783 312,277 86.6 Head of private equity 245,850 275,000 352,250 310,979 89.6 Head of fund management 175,690 221,205 249,313 220,524 83.3 Head of capital markets 145,000 160,000 191,500 176,172 92.7 Head of commodities trading 148,628 152,020 160,000 152,320 60.0 Director of operations 126,000 136,000 150,000 162,426 35.7 Head of bond trading 124,540 133,445 139,000 134,600 94.1 Head of research 123,600 133,050 150,000 148,838 61.9 Director, risk management 112,750 129,565 151,745 137,723 53.9 Director, private banking 100,000 114,800 120,000 112,047 45.7 Chief FX dealer 100,118 111,985 123,845 121,195 18.2 Chief economist 87,525 107,855 129,775 109,842 25.0 Senior credit analyst 50,050 53,380 57,400 53,500 19.0 IDS Executive Compensation Review 374 April 2012
Survey round-up Marketing professionals pay: Marketing Week and Ball & Hoolahan Salaries for UK marketing directors were running at an average 77,799 over the year to November 2011, finds the latest survey of the profession by Marketing Week in collaboration with Ball & Hoolahan. By sector, the survey shows that marketing directors salaries ranged from as low as 52,781 in charities to as high as 175,000 in home entertainment. Across all marketing directors, the survey indicates that salaries went up by an average 4.2 per cent last year, with increases expected to average 3.3 per cent in 2012. In comparison, across the profession as a whole, the average salary increase in 2011 was 4.5 per cent. Altogether, based on over 3,000 responses from an online survey of Marketing Week readers, the survey looked at 14 marketing job tiles broken down by 17 sectors. A summary of average salary findings for selected job titles in each sector is shown in the table below. Included in the table are some specific job titles such head of insight and brand/product manager. salaries for heads of insight varied markedly, from just 27,000 in cars to 86,875 in alcoholic beverages. Whether the low salary is due to low sample numbers or the inclusion of part-time employees is not evident from the survey. Graduate trainees and other jobs Not featured in the table are the average salaries for graduate trainees, which ranged from 18,000 in the white/brown goods sector to 25,500 in charities. Similarly excluded from the table are customer relationship manager (CRM) roles. At the CRM level, average salaries stretched from 22,500 in sports marketing and publishing to 47,500 in white/brown goods. Along with sector, location also had an impact on salary levels, with marketers unsurprisingly paid the most in London. The average marketing salary in the Capital was 47,963, which was more than 45 per cent higher than the equivalent in Wales at 32,915. salaries for particular job titles also varied by region. A marketing director in London, for example, had an average salary of 87,668, which compared to 54,000 in Wales. Marketing directors in Scotland also had a high average salary of 85,000. The corresponding average salaries for marketing managers in the same three regions, London, Wales and Scotland, were 40,438, 31,800 and 31,944. salary rates for selected marketing professionals by selected industry at November 2011 (Source: Marketing Week and Ball & Hoolahan) Marketing director Communications director Head of insight Head of customer marketing Marketing manager Brand/ product manager Industry FMCG 95,155 42,500 85,000 63,400 45,328 35,573 Alcoholic beverages 85,000 86,875 55,000 53,091 36,778 Healthcare 98,333 80,000 55,833 32,929 34,958 White/brown goods 91,667 47,500 41,115 32,250 Cars 145,000 27,000 37,214 Hi-tech 77,875 105,000 48,750 43,054 45,214 Publishing 76,318 85,000 55,000 61,250 32,263 31,000 TV 115,000 79,000 70,000 55,000 34,400 44,900 Internet/new media 80,500 72,857 63,750 47,900 33,063 34,688 Home 175,000 77,500 65,000 43,900 32,500 entertainment Retail 98,409 68,333 58,333 38,685 35,556 (high street grocery) IT 70,857 115,000 55,000 37,439 56,875 Financial services 107,000 115,000 75,000 75,833 38,952 38,900 Telecoms 110,000 37,500 48,750 83,333 41,540 43,142 Leisure 67,353 63,750 61,250 36,586 32,700 Sports marketing 67,500 85,000 42,500 37,400 41,000 Charities 52,781 75,000 80,000 50,000 34,021 37,688 All industries 77,999 66,885 69,170 61,294 37,305 36,039 Survey details Title: Marketing Week/Ball & Hoolahan Salary Survey 2012 Producer: Marketing Week and Ball & Hoolahan Data at: November 2011 Source and coverage: 3,357 responses from readers of Marketing Week. Salary and benefits data provided for up to 14 marketing titles. Data analysed by industry sectors, region and gender. Definitions: Salaries shown are averages calculated from self-reported salary bands and exclude benefits and bonuses Enquiries: Marketing Week, 50 Poland Street, London W1F 7AX. Tel: (020) 7970 4000. Price: Summary free to download www.marketingweek.co.uk. IDS Executive Compensation Review 374 April 2012 15
Survey round-up Survey details Title: The RICS and Macdonald & Company Rewards & Attitudes Survey 2012 Producer: The Royal Institute of Chartered Surveyors (RICS) and Macdonald & Company Data at: December 2011 and January 2012 Source and coverage: 9,819 UK surveying professionals covering prime professional activities in the property sector. The survey provides data on salary and bonus levels by main professional activity, main employer activity, membership status and responsibility. Information also provided on salary increases and benefits. Definitions: Salary excludes bonuses and other benefits Enquiries: Macdonald & Company, 40a Dover Street, Mayfair, London W1S 4NW. Tel: (020) 7629 7220. Website: www.macdonaldandcompany.com. Email: salarysurvey@ macdonaldandcompany.com Price: Executive summary free to download from website. Full report and online statistics package 599 + VAT 16 Property professionals: RICS/Macdonald & Company Just over half of property professionals reported their pay was frozen last year, while a further 7 per cent said their salaries had been reduced. Evidence that property specialists are facing tough times is documented in the latest survey of profession from the Royal Institute of Chartered Surveyors (RICS) and Macdonald & Company. The survey, based on data collected in December 2011 and January 2012, found that for the 38 per cent of respondents receiving a salary increase last year, the average rise was 7.1 per cent. Altogether, some 9,819 UK surveying professionals responded to the survey, providing salary, bonus and benefits details. Across all those surveyed, the average salary was 48,329, but a more detailed breakdown showed that pay levels varied according to institute membership status. Fellows of the institute, FRICS, had the highest salaries, averaging 58,919, while the corresponding figure for members, MRICS, was 49,285. In contrast, the lowest earners were part-qualified members with an average salary of 32,734. salary levels A more detailed overview of average salaries and bonus payments by employers main area of activity can be seen in the table below. When it comes to basic salary, heading the table are property professionals working for financial institutions and fund management where the average was 67,227, followed by development, investment and property companies where the average was 62,114. At the other end of the scale is urban design control with average salary of 32,455 and rural practice where the equivalent was 39,496. As well as employers field of activity, the survey also gives figures by main area of professional activity. This shows that the highest average salary was at chief executive and managing director level at 90,811, which was over two and a half times greater than the 33,946 received by the lowestpaid surveyors working in arts and antiques. Bonuses and benefits In addition to salary, around a third of respondents reported securing a bonus during the year, with the average payment worth 13,461. Analysis of average bonus awards by level of responsibility showed that they were the highest for chief executives and managing directors at 41,909. The next highest bonus, averaging 37,133, was received by principals, directors and equity partners. Bonus values dropped substantially, however, for property professionals lower down the jobs hierarchy, with awards averaging 2,269 for assistants and trainees and 3,977 for other staff. Also featured in the survey is an indication of the benefits received. Leading the way in popularity were mobile phones, offered to 63 per cent of property professionals. This was followed by professional subscriptions, offered to 60 per cent. Fewer staff, just 22 per cent, were provided with a company vehicle, while 29 per cent were given a car allowance. salary and bonus for property professionals by main activity during December 2011 and January 2012 (Source: RICS/Macdonald & Company) Employer main activity salary bonus Employer main activity salary Property manager 48,012 8,945 Financial institution/fund management Quantity surveying 44,584 5,951 Development/investment/ property company bonus 67,227 25,162 62,114 21,469 Rating 41,597 14,923 Practice/consultancy/advisor 44,686 12,681 Regeneration 52,804 6,712 Occupier 59,624 12,131 Research 56,466 7,400 FM service provider 56,367 11,163 Residential agent/sales/ 47,989 24,271 Contractor 50,444 9,590 leasing Residential development 55,647 20,338 Utilities/power 56,405 8,747 Retail agent/leasing 46,326 27,330 Engineering 51,134 7,684 Rural practice 39,496 9,241 Non-profit making 48,305 6,092 organisation Urban design 32,455 3,500 Education 47,957 5,824 Valuation 43,360 8,631 Central/local government 41,121 5,765 Other 51,643 16,145 All 48,329 13,461 IDS Executive Compensation Review 374 April 2012
Job market Retail managers...fierce competition among retail managers in the job market means that candidates are prepared to be flexible on terms and conditions. British Retail Consortium figures show that total retail sales growth was only 0.1 per cent during 2011 with sales in the non-food sector falling by 1.1 per cent. A key barometer of the UK s economic recovery is the performance of the retail sector. Economic turbulence and the collapse of a number of high street chains in recent years have had inevitable consequences for those working in the industry. We take a look at how one key group, retail managers, are faring in the current difficult job market. Tough trading and store closures have flooded the market for retail managers with a ready supply of candidates, but despite the excess supply there is evidence that opportunities for the best candidates remain. Describing the current job market, recruitment consultant AdMore Recruitment says that while there is definitely activity out there at the moment, much of the current demand is generally coming from employers replacing the least able employees rather than from those creating new positions as a result of business expansion. This is because with the increased number of candidates, employers can pick and choose high calibre candidate in order to improve their business. Another recruitment consultant, Quest Search and Selection adds that fierce competition among retail managers in the job market means that candidates are prepared to be flexible on terms and conditions. At the same time, recruitment consultants report that economic uncertainty has produced a pool of candidates that place a high value on job security and are less willing to take risks by moving jobs. Yet, say recruiters, the highly skilled can be persuaded to move for the right price. This has created a two-speed job market, with a large number of retail managers out of work and looking for jobs and another group drawn to the security of their existing roles and cautious about changing jobs. Retail picture mixed Affected by store closure at some well known high street retailers such as Mothercare, La Senza and Peacocks, British Retail Consortium figures show that total retail sales growth was only 0.1 per cent during 2011 with sales in the non-food sector falling by 1.1 per cent. Nevertheless, despite the poor growth, recruitment consultants say that some segments are more buoyant, providing job opportunities for retail managers. Individual sectors currently performing strongly are discount retailers and convenience stores. Moreover, says AdMore, Table 1: Regional and area management salaries in retail operations by type of outlet at March 2012 (Source: AdMore Recruitment) Outlet type London South Midlands North Scotland Food multiples Min 55,000 55,000 55,000 55,000 55,000 Max 140,000 140,000 140,000 140,000 120,000 Convenience Min 30,000 30,000 25,000 25,000 25,000 Max 70,000 65,000 65,000 65,000 65,000 General merchandise Min 45,000 40,000 40,000 40,000 40,000 Max 70,000 70,000 70,000 70,000 70,000 Fashion Min 40,000 35,000 35,000 35,000 35,000 Max 90,000 80,000 80,000 80,000 75,000 Department stores Min 70,000 70,000 70,000 70,000 70,000 Max 120000 120000 120000 120000 120000 DIY Min 50,000 45,000 45,000 45,000 45,000 Max 100,000 100,000 100,000 100,000 100,000 Retail healthcare Min 45,000 45,000 40,000 40,000 40,000 Max 70,000 70,000 70,000 70,000 70,000 Electrical/telecoms Min 45,000 45,000 40,000 40,000 40,000 Max 80,000 80,000 75,000 75,000 75,000 IDS Executive Compensation Review 374 April 2012 17
Job market retail store management salaries by region at March 2012 salary Region London 29,700 East 27,500 East of England 27,500 Yorkshire and the Humber 27,500 South East 26,400 North West 26,400 West Midlands 25,300 Wales 24,200 South West 23,100 Scotland 23,100 Northern Ireland 22,000 North East 22,000 Nationwide 27,500 Source: Hays SalaryTrack...employers seeking to attract the very best retail managers are accepting that they have to offer financial inducements for people to leave their current positions. the retail healthcare market, driven by restructuring to the health sector in general, is also seeing an increased demand for retail managers. As well as variations in demand by retail segment, there were also variations by region. AdMore found that regions where recruitment activity was highest were the South and the Midlands, while specialist recruiter 360 Resourcing indicated that the North West was also doing well. Employers changing selection methods Whatever the segment or region, all employers are receiving an abundance of applications and as a consequence, says 360 Resourcing, recruiters have the opportunity to be a lot more selective. But the high volume of application for each role is also creating administrative headaches and as a result companies are changing their selection methods. According to 360 Resourcing, companies are undertaking more screening and pre-screening of applications and are also increasingly using assessment centres to identify three or four key candidates. But while the longer recruitment process has put a strain on HR resources, 360 Resourcing says employers are taking a positive view. It adds that with more candidates, companies know they can get the best if they put the effort in. But the increased supply of candidates is also having a direct impact on recruitment consultants. According to AdMore, the increased costs associated with having to deal with the high number of applicants has led some employers to move the recruitment process back in-house, cutting out the need for job agencies altogether. The drawback with this, argue the agencies, is that employers may miss the higher calibre candidates who are not actively searching for a new job. It is recruitment consultancies, they say, that are best placed to recognise such candidates and persuade them to move. Recruitment salaries Current recruitment salaries are reflecting the two-speed job market with some employers willing to pay different rates to those with a job and those without. Quest, for instance, finds that salaries have needed to become a lot more attractive to entice candidates reluctant to move jobs to new roles. As an example, it cites a role for which it is currently recruiting where the salary and benefits package has had to be increased by 10 per cent compared with 18 months ago. AdMore also found employers seeking to attract the very best retail managers are accepting that they have to offer financial inducements for people to leave their current positions. Looking across the market as a whole, 360 Resourcing says that recruitment salaries remain flat. The recruiter adds that employers can recruit more experienced and high calibre candidates without needing to improve salaries, purely because of the excess supply of applications. A more detailed guide to current recruitment salaries for regional and area managers is provided in table 1, supplied by AdMore. The table shows the highest and lowest salary rates in eight types of retail outlet in five regions. From the table it can be seen that food multiples pay the highest salaries, reaching 140,000 at the maximum across all regions except Scotland. But if the minima are looked at, then department stores pay relatively high rates, with their lowest salaries running at 70,000 across all regions. 18 IDS Executive Compensation Review 374 April 2012