Top of the pile?
How much is in your wallet and how much is in those of other directors? Insider publishes its first comprehensive guide to the salaries of Midlands directors - the typical pay rates and those taking home the most. Are you being short changed?
Every year we hear the same howls over inflation busting pay settlements for the bosses. But if that's what it needs to keep and attract talent, Midlands companies, it seems, don't mind paying their directors a nice little earner.
Boardroom pay trends in the UK's top plcs often set the tone for future developments in other quoted companies and for the rest of the management population. There are those, of course, that think the market should be free to choose what it pays its top earners.
For example, James Cooper, policy advisor at Birmingham Chamber of Commerce and Industry, thinks companies should be left to set whatever bonus system they choose for their employees.
He says: "Large companies play an important role in society by creating wealth and jobs. As a region the West Midlands has the highest proportion of the workforce without qualifications compared with all other regions and, as such, businesses need to fight hard to compete for the talent on offer to them.
"One of the primary means by which they can do this is by offering bonuses and competitive pay deals."
The fact that Birmingham is high in the rankings for both median directors' pay and highest directors' pay suggests it is one of the most successful locations in the region in which to do business, housing a number of successful firms.
The fact that it is not at the very top of the rankings may, however, be a factor of its increasing attractiveness as a place of work for senior businesspeople when compared with other locations. It could also suggest that the cost of living in locations such as Hereford, Shrewsbury and locations in the East Midlands is higher than in Birmingham and its immediate surrounding area.
Simon Bell, director at Michael Page Executive Search, is pragmatic about directors' pay. "The Midlands is competitive on a national scale around Birmingham, but, the further east or west you go, salaries can then drop and struggle to compete against the urban centres of London, Manchester and Birmingham. This is challenging for high-growth companies in these areas as candidates are reluctant to relocate."
According to Bell, manufacturing has traditionally been the area with the majority of positions available in the Midlands, but as this sector adapts to changing markets, businesses and professional services companies are growing rapidly and are increasingly paying above the market rate to secure talent.
He adds: "A good financial director will always come at a premium in the Midlands due to the long-term value and savings they could be responsible for."
Over the last year there has been a growth in the salaries of those directors working in the business services sectors, property, construction and high-tech. But what of the high earners of tomorrow - where do they come from?
Bell highlights the new breed: "There is still a great deal of activity in the venture capital arena. We're seeing a lot of entrepreneurs setting up new high-tech companies with the help of venture capitalist backing and regional funding and incentives."
However, there are those for who the level of pay if unacceptable. The T&G union has been consistent in its pressure to close the gap between the best and worst paid. In 2006 its general secretary, Tony Woodley, said: "Our members are expected to take cuts to their pensions and work harder and longer, yet British directors continue to cream off the profits. This is not just about shareholder confidence, but it is also about social justice, good business practice and industrial relations."
In response to our survey a spokesman for the T&G said the figures demonstrated that no director could plead poverty. But the issue which angered the unions was the overall way directors' pay has grown while their workforces' has stagnated in relative terms.
He added: "Pay rises for directors are at least double those for the workforce and our national research shows the real fat cats have pocketed increases up to 17 times that of their staff.
"We don't object to fair rewards for skills and risk, but directors cannot expect to lecture on a do as I say not as I do basis. Without the workforce there would be no companies and profits. Sometimes directors have a memory lapse on this point. That's why we're here to remind them."
Cooper, needless to say, disagrees: "Salaries depend upon many factors. While directors' salaries are determined by firms' wishes to correctly reward senior individuals for their work and for success, it is also balanced out by the quality of the location in which they work. If the location is unattractive, a business may need to pay directors more to retain them. Salaries are also related to the cost of living within areas."
Richard Lambert, director general of the CBI, while agreeing that businesses should be free to pay their top people what they think is fair, would like to see companies make more of an effort to justify such payouts.
He says: "Social cohesion is something we should be concerned about. Most of us do feel uncomfortable about a society in which small numbers of people are generating enormous levels of wealth for themselves, while large numbers remain on low incomes.
"The sensible approach starts with a sense of perspective. Profit shares and bonuses are at cyclically high levels: they won't stay there forever. But firms need to get their act together. They should do a much better job of explaining the great value their success brings to the economy as a whole," he says.
Lambert cited examples of financial services firms working in their communities, helping schools and families and raising money, but added: "At the moment there's an information vacuum. We read about the bonuses, but not the other side of the story.
"The question is not whether we want to attack pay and bonuses. It's about whether we want to sustain the success of the UK as one of the world's great global financial centres.
I think the answer to that is clear."
Miles Templeman, director general of the Institute of Directors, is adamant that our figures do not necessarily mean that we're breeding a new generation of fat cats. "Yet again the survey belies the fat cat image of boardroom Britain. The picture that emerges is one of hard work and reasonable pay rises," he says.
"Directors' remuneration is a much more complex topic than is often portrayed. Our aim is to put the issue in perspective so directors, and business in general, will be more appreciated by society at large."
Interestingly, research by Deloitte shows that executive directors on main boards dropped by 6.5 per cent in 2006, the fourth successive year of decline, as UK plc respond to the Higgs report by cutting the number of executives faster than they add non-executive directors.
The number of non-executive directors remains unchanged from 2006 and has only increased by 12 per cent over the last four years.
Carol Arrowsmith, head of the remuneration team at Deloitte, says: "Companies are striving to achieve the boardroom equilibrium recommended by Sir Derek Higgs, but not in the way many people expected.
By reducing the number of executive directors, companies are striking a better balance between executive and independent board members and, at the same time, making the boards less unwieldy.
"The knock-on effect is that the demand for non-executive directors is stabilising although fees continue to increase, albeit not as fast as in 2006, with the overall median increase being 7.1 per cent this year compared to 10 per cent last year."
Depressingly, the same research shows that there is still a huge gender imbalance in the boardroom.
There has been no increase in the number of female executive board members in 2006 and only a 1 per cent increase in the number of female non-executive directors.
While many firms hope to cut costs by cutting the number of directors they have on their board, the wages in the 2007 table are only indicative of what most feel is performance-related pay.
After all, a company will only pay what it can afford to its directors and, while these figures may seem extravagant to many, there are plenty of people in the wings who think that it's more than justified.
