Management pay is squeezed during the recession

There have been some interesting surveys on the effects of the recession on people management in the last couple of months. This one from Hay Group is useful for students in that it highlights one of the operational effects of the recession - this time on the remuneration of senior business management.

According to Hay Group, UK businesses have squeezed executive pay during the recession.

Their research was pretty extensive - they surveyed 12,000 executives in 500 UK plcs. The survey found that the median total remuneration in this group had dropped by 10.1% since May 2008 and 29% did not receive a bonus during 2009.

The senior management tier below board level has also experienced a more restrained approach to executive pay. The median salary for executives below board level saw zero increase on last year, while median total cash (salary plus bonus) - has dropped by 0.6% since 2008.

The important point for students to remember is that this survey is of quoted UK companies. Stock Exchange regulations require every quoted company to have an independent Remuneration Committee which sets the policy and bases of executive pay. Such committees are subject to some quite strong pressures from outside stakeholders - particularly the investment community. They are also publicly accountable for their decisions - they have to explain them (in great detail) in the Annual Report.

Some useful comments from the Press Release accompanying the survey:

Jon Dymond, director at Hay Group, said:

“The last financial year has seen remuneration committees caught between militant shareholders, political pressures and media sensationalism, and on the other hand the need to retain top talent and motivate their most senior leaders to steer firms safely through the economic storm. Once the economic recovery is under way, we may see an element of catch-up in salaries.”

“With business confidence returning, share prices moving upwards and a continued perception that top talent is scarce, executive salaries are likely to begin to move up modestly in 2010.

“However, bonuses paid in 2010 are expected to be smaller than in the past two years, due to lower earnings delivered by many businesses during 2009.”