{"id":488126,"date":"2023-11-21T12:45:55","date_gmt":"2023-11-21T12:45:55","guid":{"rendered":"https:\/\/www.constructionnews.co.uk\/?p=488126"},"modified":"2023-11-23T13:04:46","modified_gmt":"2023-11-23T13:04:46","slug":"executive-pay-2023-sharp-earning-curve","status":"publish","type":"post","link":"https:\/\/www.constructionnews.co.uk\/financial\/executive-pay-2023-sharp-earning-curve-21-11-2023\/","title":{"rendered":"Executive pay 2023: sharp earning curve"},"content":{"rendered":"

Construction News research reveals a 30 per cent hike in the average annual package for the 20 best-paid contractor plc executives<\/em><\/b><\/span><\/p>\n

Amid the continuing cost-of-living crisis, executive pay remains a contentious issue for the general public. In August, the High Pay Centre (HPC) revealed in its annual survey that average pay among FTSE100 chief executives rose by 16 per cent in 2022 to \u00a33.91m, with the group voicing its dismay.<\/p>\n

\u201cAt a time when so many households are struggling with living costs, it is surely not desirable or sensible for companies including some of Britain\u2019s biggest employers to prioritise a half-a-million-pound pay rise for executives who are already multimillionaires,\u201d the think-tank announced.<\/p>\n

It certainly feels a long way from when Theresa May promoted the idea of executive-pay reform in 2016, early in her tenure as prime minister.<\/p>\n

The best-paid construction boss in the latest Construction News<\/i> top 20 table \u2013 Balfour Beatty\u2019s Leo Quinn \u2013 took home almost four times less than the highest-paid chief executive in the FTSE100 (AstraZeneca\u2019s Pascal Soriot).<\/p>\n

But 80 per cent of the construction executives featured in the new CN<\/i> list still enjoyed healthy increases in their overall compensation. Last year\u2019s analysis showed that the taps had been turned back on post-pandemic \u2013 and this year\u2019s table shows that trend continuing, with a 30.4 per cent increase in average overall remuneration. <\/span><\/p>\n

Total reward packages in 2022 for the individuals in the top 20 reached a collective total of \u00a332.6m compared with \u00a325m the year before. This translates into an average of \u00a31.63m each, up from \u00a31.25m in 2021, driven by bonuses and rewards from long-term incentive plans (LTIPs) that include share options.<\/p>\n

Only four executives in the top 20 this year saw their overall remuneration fall.<\/p>\n

Stephen Rawlinson, a director at financial analysts Applied Value, says: \u201cThe key issue is that 2022 was a period of a strong bounceback in [plc] earnings. Markets were booming, and for the first half of the year, inflation in labour and materials was still benign, supply chains were tricky but manageable and interest rates were low.\u201d<\/p>\n

Winners and losers <\/span><\/h3>\n

Kier chief executive Andrew Davies continued his ascent up the ranks as the group\u2019s turnaround continues. After a big jump in our previous survey, Davies rose another four places to sit in the second spot, behind Quinn.<\/p>\n

Davies received total remuneration of \u00a32.2m in the year to 30 June 2022 \u2013 a jump of 70 per cent. He was boosted by a \u00a3739,000 performance-related bonus, after beating a \u00a3115.1m target for adjusted operating profit (Kier recorded \u00a3120.5m). The firm\u2019s remuneration committee said it considered this a \u201cgood level of performance taking into account the economic issues in the second half of FY22\u201d.<\/p>\n

After missing out last time around on compensation from the group\u2019s LTIP, based on the three-year performance period ending 30 June 2021, Davies was handsomely rewarded with an extra \u00a3685,000. Explaining this award, Kier\u2019s remuneration committee pointed to the sale of Kier Living and a \u00a3241m capital raise in 2021, as well as \u201csignificant improvements\u201d to the group\u2019s financial position, such as cutting its debt and growing its order book to \u00a32.1bn.<\/p>\n

Kier\u2019s chief financial officer Simon Kesterton also enjoyed a large bump in his overall package, albeit a more modest 34 per cent to \u00a31.53m. He remains the third-highest-paid finance boss in this year\u2019s top 20.<\/p>\n

While Kier\u2019s remuneration committee saw fit to reward its top executives based on the group\u2019s revival in the year ending 30 June 2022, a significant proportion of shareholders were less impressed.<\/p>\n

Following rebellions in 2021 and 2019, Davies\u2019 package was approved at the 2022 AGM with only 56 per cent of shareholders voting in favour. But proxy adviser company Pirc had urged shareholders to vote against it, arguing that Davies\u2019 package, when viewed over a five-year perspective, did not align with total shareholder return; that the pay ratio of 30:1 to the average employee was too high; and that the LTIP performance period was not long enough.<\/p>\n

In its report for the year to 30 June 2021, Kier vowed not to increase Davies\u2019 basic pay for 2022\/23, and last year the firm launched a review of its executive remuneration policy. This May, the board noted in a statement that it \u201cunderstands the sensitivities\u201d around the issue of executive pay and had \u201cengaged directly\u201d with its key investors in March and April to obtain their views. If the remuneration policy does change, details will be divulged in the company\u2019s annual report for 2022\/23.<\/p>\n

Rawlinson is unsurprised by shareholder frustration, commenting: \u201cIt\u2019s understandable that returns
\nto management running ahead of those to shareholders should cause some resentment.\u201d<\/p>\n

Elsewhere, Galliford Try\u2019s strong performance in 2021\/2022 resulted in boss Bill Hocking rising three places in our table to number five. Hocking\u2019s overall package nearly doubled to \u00a31.96m, boosted by a \u00a3904,000 bonus. The year before, he pocketed a bonus of \u00a3540,000. Similarly, Galliford\u2019s finance boss Andrew Duxbury saw his package almost double to \u00a31.5m, making him this year\u2019s highest climber, up eight places to number 10.<\/p>\n

Explaining the rewards, Galliford\u2019s remuneration committee said: \u201cThe group achieved a strong performance against targets set at the start of the financial year. Taking into account the group\u2019s profitability and enhanced dividends to shareholders, the committee determined that the bonus level produced by the scorecard of 100 per cent is an appropriate reward given the group\u2019s operational and financial performance.\u201d The awards were partly driven by the fact that Galliford achieved a pre-exceptional profit before tax of \u00a319.1m in the year ending 30 June 2022.<\/p>\n

Triple wins<\/span><\/h3>\n

For the second consecutive year, London-headquartered TClarke was in the unusual position of having three executives in the top 20. All three pulled in more than a million pounds, helped by hefty annual bonuses after the firm surpassed its operating profit target of \u00a311.5m and fulfilled its environmental, social and governance objectives.<\/p>\n

Chief executive Mark Lawrence, group managing director Mike Crowder, and group financial director Trevor Mitchell all enjoyed a 73 per cent increase in their annual bonuses. Their bonuses were the maximum 150 per cent of their basic salaries. All three were also helped by a healthy rise in LTIP rewards. For example, Mark Lawrence\u2019s LTIP award jumped to \u00a3528,198 \u2013 more than doubling the \u00a3217,982 he received in the previous year. <\/span><\/p>\n

At Balfour Beatty \u2013 number one in the CN100 list of top contractors \u2013 boss Leo Quinn had an exceptional year in the pay stakes. The long-serving chief executive saw his overall package increase by 38 per cent to \u00a34.1m. It ensured he comfortably retained his dominance in the executive pay table, after only just edging out Morgan Sindall boss John Morgan the previous year.<\/p>\n

\"Leo

Leo Quinn<\/p><\/div>\n

Quinn\u2019s overall package was boosted by \u00a31.9m of rewards from hitting long-term incentives relating to the firm\u2019s share performance and returns to shareholders. Since rejoining the company in 2015, Quinn has overseen an improvement in its fortunes centred around the group\u2019s \u2018Build to Last\u2019 strategy. In its last full-year Balfour reported a 56 per cent increase in underlying pre-tax profit to \u00a3291m, which led to a 17 per cent increase in the recommended full-year dividend. Quinn also picked up a cash bonus of \u00a3589,950, up from \u00a3510,000 the year before.<\/p>\n

Balfour\u2019s remuneration committee noted that Quinn had \u201cdriven the development of sustainability and carbon reporting across the business\u201d. It added that he had overseen \u201cimprovements in employee engagement scores, diversity and inclusion programmes and delivered improved safety performance\u201d.<\/p>\n

Philip Harrison, Balfour Beatty\u2019s chief financial officer, was also rewarded for the company\u2019s strong performance. As well as seeing his pay from long-term incentives double to \u00a3867,265, Harrison saw his basic salary increase 7 per cent to \u00a3463,998. This compared to a 3.5 per cent basic pay increase for Leo Quinn. Essentially, the remuneration committee thought Harrison was being underpaid. It said that, compared to his \u201csector peers\u201d, Harrison\u2019s basic pay was at the \u201clower end\u201d despite Balfour\u2019s market capitalisation and revenue being higher than its competitors. The committee also noted the \u201cbreadth\u201d of Harrison\u2019s role and his \u201ccontribution to the success of the business\u201d.<\/p>\n

Among those who saw a fall in their overall packages were Morgan Sindall\u2019s chief executive John Morgan and the firm\u2019s chief financial officer Steve Crummett. Both saw their overall compensation fall 28 per cent compared with 2021. Nevertheless, Morgan still picked up a total package of \u00a32m to remain in fourth spot, while Crummett pocketed \u00a31.6m.<\/p>\n

A third of Morgan Sindall\u2019s shareholders voted against the company\u2019s executive pay packages for 2021, and Morgan himself appears aware of the sensitive issue of executive pay in relation to the rest of its workforce. In the firm\u2019s annual report for the year ending 31 December 2022, the remuneration committee stated that current basic pay levels for its chief executive are in the bottom quartile for peers in the sector and similar-sized firms in other industries.<\/p>\n

The committee said this was due to \u201ca reticence by John, as both a significant shareholder and CEO, to accept salary increases above those granted to the broader workforce, despite his strong leadership and the increasing scope and complexity of his role\u201d. The remuneration committee had originally agreed to increase his basic salary, but it then abandoned the plan.<\/p>\n

\u201cThe cost-of-living crisis and high rates of inflation in the UK meant that large salary increases for executives felt out of step with our stakeholders and went against John\u2019s principles of aligning CEO remuneration increases with that of the wider workforce,\u201d the committee said.<\/p>\n

It also pointed to the fact that the group\u2019s share price had fallen, like other FTSE-listed firms, which meant an increase would be \u201cmisaligned with the shareholder experience\u201d.<\/p>\n

At Costain, boss Alex Vaughan showed similar restraint. He turned down the chance of a basic pay rise in line with the rest of the group\u2019s staff, instead opting for a lower increase of 5 per cent. This was despite Costain\u2019s remuneration committee noting that Vaughan\u2019s basic salary is \u201cat the lower end
\nof the market\u201d.<\/p>\n

Costain remuneration committee chair Fiona MacAulay said: \u201cOur aim is to always consider the wider workforce, our shareholders and other stakeholders by taking a fair, prudent and balanced approach to remuneration.\u201d<\/p>\n

The firm has also continued its strong performance on diversity. It now has a female chair in Kate Rock, and last year chief financial officer Helen Willis became the first-ever woman in the top 20 pay table. In the latest list, Willis narrowly retained a ranking at number 20, but she remains the only woman.<\/span><\/p>\n

\"\"

Helen Willis<\/p><\/div>\n

Elsewhere, two Severfield executives returned to the top 20 after more than doubling their overall packages in 2022 due to a big rise in bonuses and significant LTIP rewards.<\/p>\n

Keller\u2019s boss Michael Speakman was the biggest faller, though, dropping 10 places to number 14 after executive bonuses were hit due to a drop in pre-tax profit after the firm uncovered a financial-reporting fraud at its Australian business.<\/p>\n

Looking ahead<\/span><\/h3>\n

It is hard to discern how pay packages and LTIPs for this calendar year will pan out. Rawlinson says the \u201cacid test\u201d will be whether the likely flat performance of many companies will result in a downward adjustment of remuneration packages.<\/p>\n

As industry forecasts predict a downturn for construction, Andrew Speke from the HPC believes that shareholder disquiet will grow if remuneration packages continue to rise.<\/p>\n

He tells CN<\/i>: \u201cResponsibility clearly lies with boards and remuneration committees to take this into account and make sure they are prioritising the jobs and wages of the many employees who work for these companies, over the bonuses of underperforming bosses.\u201d<\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
\n

Construction\u2019s top 20 best paid executives <\/span><\/h3>\n
(figures based on companies\u2019 accounts for the financial year ending 31 December 2022, unless otherwise stated)<\/span><\/h5>\n<\/td>\n<\/tr>\n

Latest ranking<\/strong><\/td>\nPrevious ranking<\/strong><\/td>\nCompany <\/strong><\/td>\nPerson <\/strong><\/td>\nRole <\/strong><\/td>\nBasic salary 2022 (\u00a3)<\/strong><\/td>\nTotal package 2022 (\u00a3) <\/strong><\/td>\nTotal package 2021 (\u00a3) <\/strong><\/td>\nTotal package
\nchange (%) <\/strong><\/td>\n<\/tr>\n
1<\/td>\n1<\/td>\nBalfour Beatty<\/td>\nLeo Quinn<\/td>\nCEO<\/td>\n814,000<\/td>\n4,107,186<\/td>\n2,974,880<\/td>\n38<\/td>\n<\/tr>\n
2<\/td>\n6<\/td>\nKier1<\/sup><\/td>\nAndrew Davies<\/td>\nCEO<\/td>\n750,000<\/td>\n2,245,000<\/td>\n1,323,000<\/td>\n70<\/td>\n<\/tr>\n
3<\/td>\n5<\/td>\nBalfour Beatty<\/td>\nPhilip Harrison<\/td>\nCFO<\/td>\n463,998<\/td>\n2,137,080<\/td>\n1,541,584<\/td>\n39<\/td>\n<\/tr>\n
4<\/td>\n2<\/td>\nMorgan Sindall<\/td>\nJohn Morgan<\/td>\nCEO<\/td>\n563,000<\/td>\n2,013,000<\/td>\n2,806,000<\/td>\n-28<\/td>\n<\/tr>\n
5<\/td>\n8<\/td>\nGalliford Try1<\/sup><\/td>\nBill Hocking<\/td>\nCEO<\/td>\n463,000<\/td>\n1,957,000<\/td>\n1,027,000<\/td>\n91<\/td>\n<\/tr>\n
6<\/td>\n10<\/td>\nRenew2<\/sup><\/td>\nPaul Scott<\/td>\nCEO<\/td>\n354,000<\/td>\n1,918,000<\/td>\n1,010,000<\/td>\n90<\/td>\n<\/tr>\n
7<\/td>\n9<\/td>\nTClarke<\/td>\nMark Lawrence<\/td>\nCEO<\/td>\n440,000<\/td>\n1,657,604<\/td>\n1,043,727<\/td>\n5<\/td>\n<\/tr>\n
8<\/td>\n3<\/td>\nMorgan Sindall<\/td>\nSteve Crummett<\/td>\nCFO<\/td>\n449,000<\/td>\n1,610,000<\/td>\n2,243,000<\/td>\n-28<\/td>\n<\/tr>\n
9<\/td>\n7<\/td>\nKier1<\/sup><\/td>\nSimon Kesterton<\/td>\nCFO<\/td>\n499,000<\/td>\n1,525,000<\/td>\n1,138,000<\/td>\n34<\/td>\n<\/tr>\n
10<\/td>\n18<\/td>\nGalliford Try1<\/sup><\/td>\nAndrew Duxbury<\/td>\nCFO<\/td>\n376,000<\/td>\n1,508,000<\/td>\n760,000<\/td>\n98<\/td>\n<\/tr>\n
11<\/td>\n17<\/td>\nRenew2<\/sup><\/td>\nSean Wyndham-Quin<\/td>\nCFO<\/td>\n273,000<\/td>\n1,457,000<\/td>\n772,000<\/td>\n89<\/td>\n<\/tr>\n
12<\/td>\n14<\/td>\nTClarke<\/td>\nMike Crowder<\/td>\nGroup MD<\/td>\n375,000<\/td>\n1,417,947<\/td>\n898,657<\/td>\n58<\/td>\n<\/tr>\n
13<\/td>\n20<\/td>\nRenew2<\/sup><\/td>\nAndries Liebenberg<\/td>\nExecutive director<\/td>\n253,000<\/td>\n1,383,000<\/td>\n745,000<\/td>\n86<\/td>\n<\/tr>\n
14<\/td>\n4<\/td>\nKeller<\/td>\nMichael Speakman<\/td>\nCEO<\/td>\n588,000<\/td>\n1,297,000<\/td>\n1,625,000<\/td>\n-20<\/td>\n<\/tr>\n
15<\/td>\n19<\/td>\nTClarke<\/td>\nTrevor Mitchell<\/td>\nGroup FD<\/td>\n330,000<\/td>\n1,239,630<\/td>\n777,606<\/td>\n59<\/td>\n<\/tr>\n
16<\/td>\n12<\/td>\nCostain<\/td>\nAlex Vaughan<\/td>\nCEO<\/td>\n443,250<\/td>\n1,146,715<\/td>\n975,982<\/td>\n17<\/td>\n<\/tr>\n
17<\/td>\nNEW<\/td>\nSeverfield3<\/sup><\/td>\nAlan Dunsmore<\/td>\nCEO<\/td>\n381,000<\/td>\n1,123,000<\/td>\n521,000<\/td>\n116<\/td>\n<\/tr>\n
18<\/td>\nNEW<\/td>\nSeverfield3<\/sup><\/td>\nIan Cochrane<\/td>\nCOO<\/td>\n339,000<\/td>\n1,000,000<\/td>\n449,000<\/td>\n123<\/td>\n<\/tr>\n
19<\/td>\n11<\/td>\nHenry Boot<\/td>\nTim Roberts<\/td>\nCEO<\/td>\n457,000<\/td>\n938,000<\/td>\n983,000<\/td>\n-5<\/td>\n<\/tr>\n
20<\/td>\n15<\/td>\nCostain<\/td>\nHelen Willis<\/td>\nCFO<\/td>\n368,100<\/td>\n898,708<\/td>\n802,055<\/td>\n12<\/td>\n<\/tr>\n
\n
1<\/sup> Year-end 30 June 2022\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 <\/span>2<\/sup> Year-end 30 September 2022\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 <\/span>3<\/sup> Year-end 26 March 2023<\/h5>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

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Construction News research reveals a 30 per cent hike in the average annual package for the 20 best-paid contractor plc executives Amid the continuing cost-of-living crisis, executive pay remains a contentious issue for the general public. In August, the High Pay Centre (HPC) revealed in its annual survey that average pay among FTSE100 chief executives …<\/p>\n","protected":false},"author":18687,"featured_media":488128,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"ep_exclude_from_search":false},"categories":[552],"tags":[],"yoast_head":"\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\t\n\t\n\t\n