Bonus payouts to CEOs of Dublin-listed firms plunge 66pc

According to Hewitt’s Report on Irish Directors’ Remuneration 2009, which took soundings on executive pay from the 69 companies listed on the Irish Stock Exchange (ISE), 63pc of them did not give their directors a salary bump last year, while many had reduced directors’ salaries.

The highest paid director of an ISE company received €936,000 in total remuneration last year, when share options and pension contributions are factored in. This is down 27pc from the 2008 average of €1.3m.

The average basic salary for the highest-paid director of an ISE firm was €612,000 in 2009, which was up slightly from €610,000 in 2008.

However, the area of bonuses is where the effects of the economic crisis really begin to bite the CEOs of ISE firms, with Hewitt finding that the average bonus paid last year was 19pc of salary, down from 60pc in 2008.

The fall in total remuneration for all executive roles since 2008 is primarily due to the reduced levels of long-term incentives awarded. 

Hewitt’s research shows that while the shift away from option plans towards long-term incentive plans (LTIPs) has continued, 55pc of companies still operate market-value option plans only, as compared to 60pc in 2008. Significantly, more than half of companies listed on the ISE reported that they had not granted any award to their chief executives in 2009. 

The only senior directors who saw a rise in remuneration in 2009 were those in the category of non-executive chairman, who saw their fees increase by 3pc. According to Hewitt, this rise is probably attributable to the greater time commitment they are now likely giving to their companies.

Finance directors in ISE companies saw their total remuneration packages fall 31pc to €715,000, down from €1m in 2008.

Pay increasingly linked with performance
“Clearly what we are seeing is a reduction in the variable pay element of total remuneration as the 'paid for performance' culture is growing. This was identified in our 2008 report and it is clear from the latest results that companies are expected to link pay with performance,” said Kieran Barry, Managing Director at Hewitt.

“In addition shareholders require executive interests to be aligned with their own,” he said.

 According to Barry, executive pay is likely to remain in the media spotlight over the next 12 months.

“However, instead of incentive schemes, which encourage undue risk taking, we are likely to see greater independence among remuneration committees, salary increases linked more to inflation and work-force settlements, stronger shareholders scrutiny of any bonuses paid, greater incorporation of risk management in pay policies, more alignment of pay policy with corporate strategy and a reduction in the historically high termination payments made to departed directors,” he said.