LV= Asset Management's Graham Ashby examines the remuneration of the UK's top executives and why becoming a footballer might be a better option.
As both Tony Hayward and John Varley have found to their personal cost in recent weeks, being a CEO of a UK plc with extensive operations in the US can be very stressful.
Despite agreeing with the Obama administration to set aside $20bn to pay 'legitimate claims' in the Gulf of Mexico, Hayward is still regarded by many in the US as public enemy number one due to wanting 'his life back'. In contrast, Varley and his colleagues at Barclays have been accused in a New York court of making a ‘secret $11.2bn windfall’ on the purchase of Lehman Brothers’ US brokerage business at the height of the credit crunch.
This interrogation from the US authorities must be particularly galling for UK CEOs, many of which are paid relatively low amounts for shouldering such huge responsibilities. Don't believe me? Just look at the following statistics:
The aggregate total remuneration (i.e. annual salaries plus bonuses) of CEOs in the 11 largest UK companies in the FTSE All Share Index was £22.1m in the last financial year:
Fig 1. Largest UK companies by market capitalisation
|1||Royal Dutch Shell||€1.0m||€1.4m||€2.4m|
Source: Bloomberg, 23 June 2010
Although this may seem to be a lot of money to ‘the man on the street’, it pales into comparison with what you can earn carrying out a similar job in the US. For example, the head of oil giant Exxon Mobil received a total compensation package in 2009 of an eye-watering $27.2m (£18.2m), $3.4m (£3.0m) of which was received in annual salary and bonus.
Similarly, the head of leading US banking group Wells Fargo received a total compensation of $21.3m (£14.2m), $5.6m (£3.7m) of which was in annual salary; this compares with annual salaries of just £1.1m for the CEOs at HSBC Holdings and Barclays.
To add insult to injury, the England football team collectively earns as much in one week as many of these UK CEOs earn in one year:
Fig 2. Salaries of England Starting XI v. Slovenia
|Weekly Salary||Annual Salary|
Source: timesonline.co.uk, 2 June 2010
Indeed, it is worth noting that Robert Green, the hapless West Ham goalkeeper who helped ease the recently strained diplomatic relations with the US by causing his own spillage, earns a relatively paltry £1m a year. This is exactly the same annual salary as Tony Hayward. No wonder so many kids want to play football for a living…
Graham Ashby is head of UK Equities at LV= Asset Management
Industry Voice: Scottish Widows pension expert Robert Cochran and economist Andrew Scott discuss the future of employment and income, in episode three of Scottish Widows' podcast series.
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