Blue-chip bosses collect 10 times as much in pay and bonuses as they do from dividends.
Even though I always knew FTSE bosses collected relatively modest dividends in comparison to their fat pay cheques and bumper bonuses, I was still shocked when I worked out the figures.
According to my sums, the aggregate remuneration of the chief execs at twenty of the largest FTSE companies is 1,000% -- or ten times -- greater than the total of their personal dividend payments.
Having looked through the figures in detail, I'm now convinced blue-chip leaders in general are not aligned with the income interests of ordinary shareholders such as you and me.
Twenty top bosses
My study encompassed familiar blue-chip names such as Diageo (LSE: DGE), Imperial Tobacco (LSE: IMT) and Vodafone (LSE: VOD). I ploughed through their latest annual reports and noted each chief exec's current salary and reported total remuneration, as well as then deducing their annual dividend income from their disclosed ordinary shareholding.
Remuneration statements are complex at the best of times, so there was a bit of interpretation with some of the figures, and I had to make adjustments for foreign-exchange movements as well, but here's my overall summary for the twenty FTSE shares:
Chief exec
basic pay | Chief exec
total pay | Chief exec
dividend income | Div inc as
% of basic pay | Div inc as
% of total pay |
|---|
| £22.3m | £67.7m | £6.5m | 29% | 10% |
Essentially the twenty bosses collected basic salaries, bonuses and other benefits of about £68m, yet I reckon their aggregate dividend income is currently running at less than £7m.
This next table reveals the five FTSE leaders within my study that earn the most in dividends in relation to their total annual remuneration:
| Share | Chief exec | Div income as
% of basic pay | Div income as
% of total pay |
|---|
| Reckitt Benckiser (LSE: RB) | Bart Becht | 168% | 41% |
| SABMiller (LSE: SAB) | Ernest Mackay | 58% | 12% |
| BHP Billiton (LSE: BLT) | Marius Kloppers | 26% | 12% |
| Tesco (LSE: TSCO) | Philip Clarke | 24% | 12% |
| AstraZeneca (LSE: AZN) | David Brennan | 31% | 10% |
Sad to say, but only one boss in my study received more in dividends than his basic pay last year -- Bart Becht -- and I feel it's a real shame this payout-orientated leader is stepping down at the end of the summer. Excluding Mr Becht, dividends would represent just 8% of the total remuneration paid to the other 19 FTSE bosses in my research.
And so to the five bosses within my study that I reckon collect the least in dividends in relation to their salaries, bonuses and benefits:
| Share | Boss | Div income as
% of basic pay | Div income as
% of total pay |
|---|
| GlaxoSmithKline (LSE: GSK) | Andrew Witty | 10% | 4% |
| BP (LSE: BP) | Robert Dudley | 3% | 3% |
| Royal Dutch Shell (LSE: RDSB) | Peter Voser | 8% | 2% |
| Standard Chartered (LSE: STAN) | Peter Sands | 8% | 2% |
| Anglo American (LSE: AAL) | Cynthia Carroll | 2% | 1% |
True, Bob Dudley's dividend income has been affected by BP's problems in the Gulf of Mexico, but essentially it's a very poor showing from all these chief execs. Bottom of the pile is Cynthia Carroll, whose tight-fisted payout policy at Anglo-American -- the miner distributed only 16% of its earnings in 2010 -- leaves her collecting dividends of just £21,000 (Her annual salary tops £1m).
A few encouraging signs
Reading all those annual reports, I did see a few encouraging signs of blue chips spending more on dividends than executive pay.
For instance, I noticed the executives at Unilever (LSE: ULVR) have not received salary increases for three years, during which time the group's payout has advanced 16%. Meanwhile, the new man leading British American Tobacco (LSE: BATS) is paid less than his predecessor, yet the cigarette firm has just lifted its latest payout by a further 15%.
But all in all, I remain very disappointed with how our leading executives are still reaping far more in pay and bonuses than from the dividends that the likes of you and me receive.
The obvious ways to counter this bias would be for blue chips to lift their payouts while keeping a lid on board pay, or perhaps even better, to ensure their chief execs hold enough ordinary shares so that dividends become really important to them, too.
Either way, I'm extremely keen to see that shocking ten-fold gap between executive pay and dividends reduce in the future. I'll let you know if I see any progress.
More from The Motley Fool:
> The Motley Fool owns shares in AstraZeneca, GlaxoSmithKline, Tesco, Reckitt Benckiser and Standard Chartered.
