A year ago, the climate for executive remuneration on AIM was looking decidedly frosty. Pay rises had become the exception rather than the norm, with 34 per cent of chief executives enduring a cut in their basic salary in 2010 and a further 18 per cent seeing no change.
The latest research from our sister title Growth Company Investor reveals that 2011 represented something of a thaw for many directors. The median salary for a chief executive on AIM has passed the £200,000 threshold for the first time and now stands at £200,352 compared to £190,300 the previous year. This is an all-time high. Total board remuneration climbed to £496,500, also an all-time high and a big increase on the figure of £460,670 a year earlier.
However, these numbers don’t tell the whole story. There is still a substantial minority of AIM CEOs who saw no rise in their basic salary: 23 per cent had it frozen, and for 20 per cent it was cut.
An AIM of two halves
AIM embraces a vast spectrum of companies, from pre-revenue minnows hoping to strike literal or metaphorical gold, to billion-pound concerns like online clothes retailer ASOS. So it’s not surprising to see a similarly wide range in executive salaries. The research from Growth Company Investor breaks down pay by market capitalisation, turnover and sector, as well as taking a look at how closely it is aligned to profitability.
Chief executives of companies with a market valuation of less than £5 million earn a median £138,539, while those serving at companies worth £200 million or above make £332,674. There is an even bigger differential between the two extremes of AIM when it comes to board costs. The smallest companies pay their board a median £295,684, while the largest face board costs of £938,032.
There is also a premium on profitability, though it is not so marked. Median CEO pay at companies that make money is £223,911, compared to £177,356 for loss-making concerns. Some CEOs at the companies with the biggest losses still take home substantial sums. JJB Sports lost £181 million last year on turnover of £363 million, yet Keith Jones still took home £620,000, three times the median CEO salary for a company of its size. At ZincOx Resources, executive chairman Andrew Woollett pocketed £309,000 in total remuneration despite the company reporting a pre-tax loss of some £111 million. But this practice is not universal. The directors of oil and gas minnow Caspian, which reported a loss of £196,000 last year, took no remuneration at all.
Biggest CEO salaries
There are now 90 CEOs earning more than £500,000, more than one-tenth of all those surveyed, while 16 earn over £1 million. The highest-paid director on AIM, Gulf Keystone Petroleum executive chairman Todd Kozel, earned close to $10 million (£6.46 million) in 2010, mostly in the form of share-based payments, though his basic salary of $675,000 still looks high compared to the company’s turnover of $808,000. The company has a market capitalisation of over £2 billion on the strength of its hopes to produce 400,000 barrels a day from its Iraqi oilfield by 2020.
Other big earners include Tottenham Hotspur chairman Daniel Levy, who was paid £1.8 million last year.
The increase in median CEO pay appears to have been driven largely by bonuses, which increased from £61,000 in the previous period to £67,000 in the latest, on median figures. Basic salaries saw a small uptick from £159,025 to £160,500.
But bonus payouts are still some way from their previous peak. In 2008, Growth Company Investor’s research found that some £36.5 million had been awarded in bonuses to CEOs, but this fell sharply in the following year. It is now £30.9 million, which equates to 5.8 per cent of total board remuneration, compared to 5.9 per cent in 2008.
Like CEOs, other members of the board have also seen pay increases, but the change in the median figures is more modest. Finance directors’ pay climbed from £139,000 to £143,542, while non-executive chairmen saw a rise from £37,000 to £38,821.
One reason for a general upward movement in remuneration may be the relative optimism in the market just over a year ago, when many of the pay packages analysed in this latest report would have been negotiated. If so, you might expect to see a downward slide next year, as companies balance the need to attract and retain the best board talent with the hard realities of weak growth and subdued markets.