It’s tough running a FTSE 100 company, and it’s getting tougher. The average length of service for a CEO is falling, partly propelled by the stifling atmosphere of ESG compliance, but there’s another reason. Given the size of the rewards, there is little point in working anything like the politically correct maximum 10 years at such a full-on job.
There is no evidence of a cost-of-living crisis among leading CEOs during 2022. An analysis of 55 of them by accountants Deloitte concluded that the average FTSE boss saw a 12% pay rise last year, taking (mostly his) pay to £4.15 million.
The numbers go up every year, and attempts to restrain the pay of those running our biggest companies have a long history, mostly to try and align the interest of the executives with those of the shareholders whose money is on the line.
The result is today’s remuneration report, often needing more than 20 pages in the annual accounts, full of impenetrable jargon, social targets and peer-group yardsticks before the rem. com. concludes that most, if not all, the incentive bonuses have been “earned”. Perish the thought of ever awarding a “malus” or deduction from pay for particularly poor performance.
Yet here’s a funny thing. Vistry is a FTSE 250 company and one of the tiny group of housebuilders which dominate the UK’s industry. It was previously called Bovis Homes, and it built them so badly that the company changed its name to escape its past. Today, it is winning industry awards, although not every buyer is happy with her spanking new Vistrypad.
Not every director is happy, either. Last month two of them quit, not because of those gimcrack buildings but in protest against a proposal from a bunch of mostly US shareholders. They want to see an incentive scheme that would make chief executive Greg Fitzgerald seriously rich.
The proposal has the merit of simplicity. Not for them any worries about dissatisfied customers. Should the Vistry share price hit £18 in the next three years, they want Fitzgerald’s bonus to reach £60 million. Vistry shares have never been anything like that dear, and cost 750p today, half the price they were before the revelations about shoddy building collapsed the Bovis price.
The shareholding group argues that there should be no cap on rewards, and that for a CEO, the bigger the incentive, the better the performance. Should the shares get to £18 — perhaps helped on their way by another Help To Buy-type subsidy from a panicking government — there would be some very happy shareholders.
This argument may get a workout at Vistry’s annual meeting next month, but Fitzgerald still has the prospect of up to £40 million under the existing incentive scheme. So we are definitely not all in this cost-of-living crisis together. As you already knew.
Neil Collins and Jonathan Ford are the authors of A Long Time In Finance, a weekly podcast. Get it every Friday on Acast, Spotify or Apple apps
