Salary freezes hidden by nature of statutory disclosures

The Guardian’s annual survey of executive pay has been published, and reveals a 10% increase in basic salary for executives at FTSE 100 companies. Today’s  Guardian editorial cites voting data from Manifest noting that dissenting votes on remuneration reports in the year to 31 July was circa 12% while dissent on long-term incentive plans was below 8%.

At first glance the salary figures seem surprising, even shocking, given the economic circumstances. However a closer look at the data is more revealing.

The data included in remuneration reports relate to the figures disclosed for each financial year (the statutory disclosure) rather than the salary rate (non-statutory disclosure item).

Manifest has noted salary freezes at some companies in terms of the salary rate, but this has not yet been apparent in the figures from the statutory disclosures as the effects of the previous years salary rate increases are still being seen.

Salary rates are more usually changed part way through the financial year. Therefore a salary rate freeze is spread over varying proportions of two financial years, depending on the company. The statutory disclosures still substantially relate to pay rises awarded, for many companies, in April 2008 – some time before the full effect of the financial crisis became apparent.

As a hypothetical example, salary rate set from 1 May each year:
The first four columns relate to salary rates, the last three to the statutory disclosures.

Date Effective Annual Salary Rate (Non-statutory disclosure item) Monthly Salary Rate (Calculation) Percentage Change (Salary Rate)   Financial Year Salary Received* (Statutory Disclosure Item) Percentage Change (Statutory Disclosures)
1 May 05 to 30 Apr 06

£280,000

£23,333

         
1 May 06 to 30 Apr 07

£300,000

£25,000

7.14% increase in salary rate   1 Jan 06-31 Dec 06

£286,664

n/a

1 May 07 to 30 Apr 2008

£350,000

£29,166

16.66% increase in salary rate   1 Jan 07 – 31 Dec 07

£316,664

10.47%

1 May 08 to 30 Apr 09

£350,000

£29,166

Salary Freeze   1 Jan 08-31 Dec 08

£349,992

10.52%

          1 Jan 09-31 Dec 09 Disclosure Pending Disclosure Pending

*Calculated as 8 months at old rate and 4 months of new rate.

As for other aspects of the Guardian survey, Manifest subscribers will note that the Guardian seems to have missed the most truly astonishing figures of all – the vesting of awards under the “Added Value Plan” payout to Xstrata CEO, Michael Davis.

Links

Guardian Survey of Executive Pay >>

Guardian Editorial >>

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