Pay levels increase significantly for top execs at listed groups

Pay levels at the upper echelons of Ireland’s top listed companies increased significantly over the past five years. And many executive directors received close to maximum bonuses last year as targets were lowered due to the pandemic, according to a major report.

Consultancy firm Korn Ferry’s 2022 Ireland Board Index examines board composition and governance practice at 40 companies listed on Euronext Dublin, with input from 15 of Ireland’s leading board directors, chief executives and chairpersons.

It finds that pay levels for executive directors in 2020 and 2021 were lower than the previous year, primarily due to lower levels of incentive pay-outs as well as salary reductions as companies dealt with the fallout from the pandemic.

However, the report says the past year has seen higher bonus pay-outs, “some close to maximum”, reflecting lower target setting as a result of the pandemic and a rebounding of performance.

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The average remuneration at Ireland’s listed companies is €107,390 for a non-executive director; €980,730 for an executive director; €1,296,830 for a chief executive; €923,030 for a chief financial officer; €103,970 for a senior independent director; and €237,710 for a chairperson.

Korn Ferry Ireland managing director Bob Casey said remuneration “has gone up significantly” since his company’s previous report in 2017. “Non-executive directors were on about €60,000-70,000, while a chairperson was on about €166,000, so a lot has changed,” he said.

The report also notes that while female representation is improving at board level, there are concerns the pandemic has had a “particularly damaging effect” on opportunities for women compared with men, as a result of homeworking and home schooling.

“The number of women graduating from business schools continues to increase, but these women often still do not reach the highest levels of management nor do they find themselves sitting on company boards,” it says.

“Even at later stages in their careers, women frequently leave the workforce or do not advance to upper management.”

Women make up 29.3 per cent of board members, the report finds, but one in 10 companies has an entirely male board. A further 22.5 per cent of companies have just woman on their board.

There was an improvement in the number of boards with at least one female non-executive director since the last report was published in 2017, up from 53 per cent to 87.5 per cent. The number of boards with at least one female executive director rose from 16 per cent to 22.5 per cent.

The companies with the highest proportion of women on their boards are Diageo (60 per cent), Dalata (50 per cent), Ovoco Bio (50 per cent), Bank of Ireland (45 per cent), AIB (44 per cent), Ires Reit (42 per cent), Ryanair (36 per cent) and Hammerson (36 per cent).

The average age of both executive and non-executive directors has increased to more than 61, while just 9 per cent of directors have strong tech experience despite the drive towards increased digitalisation. Almost half of all non-executive directors come from either the financial or professional services sectors.

The area of environmental, social, and governance (ESG) is now considered a full board issue and not the preserve of a niche department. Three in 10 companies have appointed an ESG committee while a wide range of ESG metrics are reflected in incentive structures.

The report also notes a growing number of companies delisting from Euronext Dublin, including Aryzta, Applegreen and UDG Healthcare.

It says increased regulation, corporate governance requirements and quarterly reporting are just a few of the matters causing companies to “consider whether the benefits of being listed outweigh the burden of additional administration”.

It identifies “growing shareholder activism” as a potential issue that listed companies are facing. Some directors are also concerned about the “rigid structure and lack of flexibility” in determining remuneration packages for executives.