Remuneration of top managers curtailed

The TriFinance study 2009. The Executive Remuneration Research Centre of Vlerick Business School in cooperation with GUBERNA, the Directors’ Institute, has concluded its annual research into the remuneration of top managers*. 99 Listed companies were considered for the analysis. In addition to practices related to publication the research also focused on the amount and composition of the remuneration package. The figures concern 2008. They produce interesting findings as compared to 2007.

In 2008 the crisis had a considerable impact on the bonus of top managers. In almost all listed companies the bonus dropped considerably. Whereas in 2007 the bonus still represented 37% of the total remuneration package of a Bel 20 CEO, in 2008 it plummeted to 13%. However, the weight of the share-related remuneration has remained stable. On average the total cash remuneration of CEOs has dropped by one third. A growing number of companies are publishing their top salaries, but there is still room for improvement. The Bel 20 companies are already endeavouring to comply with the recommendation in respect of transparency of the top salaries, yet a third of the Bel Mid and up to half the Bel Small companies still have a long way to go. Furthermore, communication about the bonus systems and severance pay is open to improvement 

Xavier Baeten, Manager of the Executive Remuneration Research Centre

Details of the Research

Note regarding the conclusions: All amounts are recalculated in respect of the total cost for the company (including employer contributions to the social security where required) in order to counterbalance the influence of the top manager’s status (self-employed or employee).

  • Fixed salary. The median (middle observation) of the total cost of the CEO’s fixed salary amounted to a rounded off amount of 770,000 Euro (Bel 20), 430,000 Euro (Bel Mid) and 320,000 Euro (Bel Small). As compared to 2007, this represents a slight drop in the Bel 20, a considerable drop in the Bel Mid, and ex aequo in the Bel Small.
  • Bonus. The effect of the recession is particularly noticeable in the bonus. Only 3 companies awarded their CEO a higher bonus, 5 companies awarded the same bonus and the bonus decreased in no fewer than 26 companies. Where the 2007 bonus represented 81% (Bel 20), 87% (Bel Mid), 28% (Bel Small) of the fixed salary, in 2008 this was only resp. 24%, 37% and 21%. A similar evolution can be noticed among the other members of the Executive Management.
  • Total cash reward. As a consequence of the evolution in the fixed salary and bonus, the total cash reward of CEOs of listed companies in Belgium has dropped by respectively 32% (Bel 20), 34% (Bel Mid) and 22% (Bel Small). The tension between the CEO’s total cash reward and that of the other members of the Executive Management is 2 (Bel 20) and 1.7 (Bel Mid and Bel Small) respectively.
  • Severance pay. Although a number of companies have adopted common law, a specific settlement is far more common. Customs vary considerably, but most companies offer between 12 and 18 months notice. The severance pay is most frequently calculated on the basis of the fixed salary.

Publication of top salaries

Since 2005, the Belgian Corporate Governance Code has determined that listed companies must publish the salaries of the CEO and of the other members of the Executive Management.

  • A little more than three quarters (85%) of companies publish information about the top salaries in their annual report, and 54% state the CEO’s remuneration separately, in compliance with the Code. These 54% represent 83% of the total market capitalisation. This is an upward trend as compared to 2007. 27% state the global remuneration of the CEO together with that of the Executive Management, and 4% only provide information on the CEO’s salary. 15% do not provide any (separate) information regarding the CEO and/or Executive Management.
  • Virtually all companies in the Bel 20 comply with the Corporate Governance Code with regard to the publication of top salaries. This varies between 70% for Bel Mid companies and 50% for Bel Small companies. There are obvious differences depending on the stock market index.
  • Although this is a positive trend, there are still a number of points of particular interest. Even though the bonus amount is relatively frequently published, little information is provided on the criteria and calculation of the bonus. Furthermore, companies in the Bel Mid and Bel Small range are economical with information about severance pay.
*Note: The research was performed under the supervision of Xavier Baeten (Vlerick Business School), with the cooperation of Annelies De Wilde (GUBERNA).

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