The 22 long-standing bosses of the largest Irish publicly-quoted companies saw their pay jump by an average 18 per cent to €2.45 million last year, as global markets rallied and corporate earnings advanced, according to figures compiled by The Irish Times.
The figures include chief executives of companies listed on the Iseq 20 index in Dublin and five Irish companies on the FTSE 350 in London, and are skewed by some large remuneration moves driven by stock bonus awards. The median chief executive compensation package rose at an even faster pace – by 22 per cent, to €2.22 million.
However, executive compensation experts predict that remuneration will drop this year as a result of Covid-19’s impact on the stock market, earnings, dividends and company cash flows. These, to varying degrees across companies, are key to the cash and share bonus plans that drive pay packages across public limited companies (plcs).
The Iseq is down 10 per cent so far this year despite a strong rally since March, following a 30 per cent surge in 2019.
In addition, a number of companies, including Kingspan, CRH, Applegreen, Aryzta, Grafton Group and Ryanair, have, at least temporarily, cut top management salaries in recent months as they slashed their costs to deal with the crisis through temporary staff layoffs or wage cuts.
"We have seen a number of CEOs take pay cuts on base salaries in recent months, which was supposed to be a three- or four-month pause. However, I don't see many of these being reinstated in the short term," said Stafford Bagot, head of the Irish office of international executive search firm Heidrick & Struggles. "We have also seen companies overseas increasing executives' long-term incentive plans to compensate for the basic salary reductions. This trend may follow in Ireland as well."
Still, remuneration committees that do not reflect the unprecedented economic shock caused by the pandemic when totting up 2020 rewards for their senior executives face the wrath of shareholders, according to proxy advisory firms, which advise major investors on annual general meeting (agm) votes.
“Compensation is always a contentious issue and, against the backdrop of the coronavirus, decisions on how to reward executives were thrown into sharp relief. We believe CEOs and boards should lead from the front in these unprecedented times and ‘share the pain’ felt by other stakeholders, including employees, customers, suppliers and the public,” said Hermes EOS, a UK-based proxy advisory firm, in a report sent to clients in recent weeks.
“This is particularly important where companies are making use of government – and ultimately, taxpayer-funded support; where there are workforce pay cuts or job losses; or where the company is otherwise distressed.”
In 2019, CRH chief executive Albert Manifold continued a trend in recent years of topping the Irish high earners' list, with his total remuneration package rising 13 per cent to €9.31 million, driven by his stock bonus plan as the building materials giant's share price and cash flow surged.
The company, the subject of several pay-related votes at agms in recent years, saw 9.3 per cent of shareholders polled by way of proxy at a virtual meeting in April , amid Covid-19 restrictions, take a stance against its remuneration report this year.
Glass Lewis, a proxy advisory firm, said in advance that it remained “particularly concerned” about Manifold’s €677,000 pension benefit for last year, equating to a high rate of 44 per cent of basic salary, even though he offered to reduce the ratio to below 25 per cent by early 2022.
The average salary of CRH's 80,250 workers rose 8 per cent to about €51,400. CRH moved in April to cut management pay by 25 per cent as up to 15 per cent of its workforce, mainly in Europe, was temporarily laid off.
Kevin Toland, the former DAA chief hired in 2017 to help turn around troubled Swiss-Irish baked goods group Aryzta, had the second most impressive headline remuneration package, totalling 4.53 million Swiss francs (€4.21 million) for the year to July 2019 – up more than 300 per cent.
This was dominated by stock incentive programme awards with a target value of 2.39 million Swiss francs, but where the shares hadn’t yet vested. Aryzta’s shares are down by almost 25 per cent since then – even after moving off their lows in recent months, thanks to a pick-up in sales as coronavirus restrictions ease globally, and the company finding itself surrounded by takeover speculation.
Kerry Group chief executive Edmond Scanlon, the son of a dairy farmer who joined the food and flavours group on a graduate programme in 1996, benefitted from a 55 per cent boost in his compensation to €3.99 million.
It may have helped the 46-year-old get over the disappointment of losing out last December in the race to buy the nutrition business of US chemicals group DuPont. The $26.2 billion (€22.2 billion) deal would have more than doubled Kerry’s size.
Tony Smurfit, the head of Smurfit Kappa, the cardboard box-maker founded by his grandfather in the 1930s, was the fourth-best paid Irish plc chief executive, with his remuneration coming to €3.67 million, up almost 9 per cent on the year.
Ryanair chief executive and 4 per cent shareholder Michael O’Leary rounded off the top five, with a 3 per cent increase to €3.48 million.
Bucking the trend, Siobhán Talbot's compensation plunged 40 per cent to €1.39 million as she voluntarily waived any bonus entitlements as the group's net profit slid 23 per cent to €180.2 million due to challenges in its key Glanbia Performance Nutrition division, which sells protein-based products aimed at athletes and body-builders.
Fruit and vegetable supplier Total Produce's executive chairman Carl McCann saw his pay package decline by 20 per cent to €1.16 million, while the remuneration of Donal Murphy, head of fuel distribution-to-technology conglomerate DCC, dipped 15 per cent to €2.61 million.
Applegreen chief executive Bob Etchingham's take-home package fell 7 per cent to €526,000, coming in at the more modest end of the Irish plcs scale. Still, Etchingham and his chief operating officer Joe Barrett own a combined 41 per cent of the forecourt retailer, which currently has a market value of almost €465 million, helped by a stock rally in recent months as coronavirus lockdowns eased.
The business, which has operations spanning Ireland, the UK and the United States, also has the lowest-paid workforce among Irish plcs. Its €204.4 million wage bill equated to an average €18,500 salary spread across more than 11,000 staff. It temporarily reduced headcount by as much as 4,800 at the height of the crisis.
At the other end of the spectrum, the highest earning were property group Hibernia Reit's tight group of 34 employees, including chief executive Kevin Nowlan and his finance chief, Thomas Edwards-Moss, who took home an average of €140,00 in the year to March. The median salary was €117,580 – compared with Nowlan's total package of €1.08 million.
The most lucrative executive programmes in the Irish market in the past decade have been those tied to the flotations of housebuilders Cairn Homes and Glenveagh Properties.
Cairn, founded by chief executive Michael Stanley, his brother Kevin and Scottish serial entrepreneur Alan McIntosh, floated in 2015 with an incentive plan entitling the trio to up to 20 per cent of total shareholder returns, including share-price gains and dividends, over seven years.
It allowed the three to convert 100 million of so-called founder shares into ordinary stock over the period, subject to a 12.5 per cent total shareholder return being achieved annually over the period. Some 80 per cent of the shares had converted by mid-2018, and the founders had raised almost €50 million selling some of their shares between September 2017 and April 2019.
A founder share scheme introduced when Glenveagh floated on the stock market in late 2017 entitled its start-up executives John Mulcahy, Justin Bickle and Stephen Garvey to 20 per cent of total shareholder returns over five years. An initial 18.99 million founder shares were converted into ordinary shares in 2018.
However, the founding Cairn and Glenveagh executives had to make do last year without receiving further millions of euro worth of shares, as their stocks failed to make a sufficient recovery from a sell-off in late 2018 to trigger further conversion.
The remuneration of Ireland’s top chief executives are dwarfed by the figures commanded elsewhere – with Silicon Valley leading the way.
Elon Musk, the driving force behind Tesla, the electric car maker, topped the global pay charts last year with a $595.3 million (€502.5 million) package, almost entirely made up of stock options.
Apple’s chief executive Tim Cook came in a distant second, with his compensation coming to $133.7 million, largely comprised of stock awards.
British online supermarket Ocado, whose shares have more than doubled in the past six months as Covid-19 restrictions boosted sales, delivered the biggest executive pay package on the FTSE last year. The company's chief executive, Tim Steiner, took home £58.7 million (€65 million), mainly by way of a stock-based bonus.
Almost 30 per cent of shareholders voted against the group’s remuneration report at its agm in May, after Glass Lewis recommended that investors show their disapproval of what it called “excessive compensation” for top executives.
Back in Dublin, bank chief executives, once among the best-paid executives of public companies, have languished for a decade towards the bottom of the pile.
After guaranteeing the banking sector in 2008, the government of the day moved within months to cap the pay of most chief executives at €500,000 and scrapped bonuses entirely. Bank of Ireland is alone among bailed-out banks in escaping State control during the crisis – and the basic salary restriction.
Its chief executive Francesca McDonagh’s pay came to €958,000 last year, unchanged from 2018.
Colin Hunt was installed as AIB chief executive in March last year on the same €500,000 annual salary and €100,000 pension entitlement as his predecessor, Bernard Byrne.
"Pay restrictions have long been a significant concern for investors, as retention of key staff is seen as important for investment cases," said Diarmaid Sheridan, an analyst at stockbrokers Davy. "The current restrictions will continue to cause concern."
Still, he notes that there are “more pressing political priorities at present” than lifting banking pay caps and bonus bans.
There's little hope among bankers that Minister for Finance Paschal Donohoe, who has been sitting for more than a year on a report he commissioned into remuneration that is known to recommend an easing of the restrictions, will be presenting that piece of work to Cabinet colleagues any time soon.