The 5 Highest Paid CEOs In The UK

How do you get to be one of the five highest paid CEOs in the UK? By outperforming the opposition, but you have to keep it up…

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

The five highest paid CEOs in the UK in 2014 were WPP‘s (LSE: WPP) boss Sir Martin Sorrell, Royal Dutch Shell’s (LSE: RDSB) now former CEO Peter Voser, CEO of real estate company Crest Nicholson Holdings (LSE: CRST) Stephen Stone, credit company Experian’s (LSE: EXPN) Don Robert and Vodafone’s (LSE: VOD) CEO Vittorio Colao, all earning over £12 million*

It’s a lot of money by anyone’s standards, but were they all worth it?

5 Stocks For Trying To Build Wealth After 50

One notable billionaire made 99% of his current wealth after his 50th birthday. And here at The Motley Fool, we believe it is NEVER too late to start trying to build your fortune in the stock market. Our expert Motley Fool analyst team have shortlisted 5 companies that they believe could be a great fit for investors aged 50+ trying to build long-term, diversified portfolios.

Click here to claim your free copy now!

WPP

WPP’s Sorrell is no stranger to “highest paid” lists, nor to pay controversy since shareholders that were unhappy about his remuneration voted against it in 2013. That led the company to change its pay policy and move away from what I, for one, thought one of the best structured (albeit generous) long-term bonus plans: the LEAP or Leadership Equity Acquisition Plan. What I liked about the plan was that it required executives to put their money where their mouth was and actually buy shares with their own cash. The company then matched these depending on WPP’s performance against its peers. Since this was usually pretty good, Sorrell got paid a lot of matching shares.His appearance at the top of the list is a legacy of LEAP with one of its three final payouts.

In the performance period being measured, WPP’s total shareholder return (TSR) increased by 241 per cent over five years. In fact, the company reported two awards in 2013, boosting his total pay to £29,846,000. However, neither of these actually vested during the 2013 fiscal year. Incomes Data Services (IDS), which counts only the money that actually ends up in the CEO’s bank account in the relevant year, has his pay in the survey as £18,543,578. That means there’s £22.7 million to count in next year’s pay, though…

Shell

In a similar situation, Shell’s former CEO received almost £11 million in long-term incentive gains, the vast majority of Voser’s £13,983,328 total pay. Long-term incentives are based on TSR, EPS, hydrocarbon production growth and net cash from operating activities.

At the end of the performance period for the share award used by IDS, which was from the beginning of 2010 to the end of 2012, Shell ranked second in its peer group for TSR. Its EPS growth ranked it first, second for hydrocarbon production growth and first for growth in net cash from operating activities. While Shell’s performance has since faltered, these results make it clear why it is at number two in the list.

Crest Nicholson

Again, Stephen Stone’s £13,615,934 in total pay was largely made up of £12.3 million in performance shares, but from a far less common type of plan. Equity interests were awarded to the CEO and other senior managers in 2009 to encourage them to grow value in the firm. These were due to vest on an “exit”, which included an IPO — Crest’s IPO in February 2013 triggered the payouts, which were based on how quickly significant value was created for shareholders and, according to the annual report, “the quantum of this, using real investment thresholds for the base line.” Since the value growth hurdles were met, stock options and performance shares vested, leading to this substantial payout.The scheme has been terminated, and more conventional share options were awarded subsequently.

While shares rose rapidly from the IPO price of 253p to a high of more than 420p in April 2014, they have since fallen back to around 334p today, indicating that while value was created for the original owners, public shareholders have not benefited as much.

Experian

At Experian, CEO Don Robert earned total pay of £12,972,842, boosted by £10.8 million in performance shares. These are based on a combination of profit before tax, operating cash flow and TSR against the FTSE 100, with a return on capital employed rider.

As the company points out in its remuneration report, during the three-year performance measurement period for the awards that vested during the last fiscal year, Experian’s stock price grew by 89 per cent. “As a result, US$8.3m [£5 million, almost half] of the … figure for Don Robert … was due to share price appreciation over the period from the date of grant.”

Robert is due another smaller, but substantial award during the 2015 fiscal year, though the company’s stock price rise during that period was lower, at 38%.

Vodafone

As with Crest Nicholson, while Vodafone’s CEO did profit from the exercise of stock options, these did not make up a significant portion of total pay, which was £12,711,503. The largest part of pay came, yet again, from performance shares. Vodafone compares its performance against the TSR of a group of telecom companies including BT Group, Telecom Italia, Deutsche Telekom, Telefónica, Orange and, unusually, an emerging market composite group that consists of the average TSR performance of Bharti, MTN and Turkcell. Given that the company is competing with these local telecom providers in these markets – and more – it is an important group to measure success against.

Although revenues and profits grew in these areas, final results were adversely affected by currency fluctuations. TSR performance, on the other hand, exceeded that of the peer group significantly, outperforming the median by 18.3 per cent a year. The performance shares are also dependent on adjusted free cash flow over three years. For the period in question the company achieved £20.8 billion, which compares with a target of £20.5 billion and a maximum of £23.0 billion.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Pay figures are taken from Incomes Data Services’ Directors' Pay Report 2014/2015, published earlier this month, performance data was supplemented from company annual reports.

More on Investing Articles

A beach at sunset where there is an inscription on the sand "Breathe Deeeply".
Investing Articles

Stock market crash: here’s why falling prices is good news

Over in the US, a stock market crash is battering high-priced stocks. But I see falling shares as an opportunity…

Read more »

Hand flipping wooden cubes for change wording" Panic " to " Calm".
Investing Articles

These 5 FTSE 100 shares crashed in 2022. I’d buy 1 today

Although the FTSE 100 index is flat in 2022, some Footsie shares have crashed hard this year. But I see…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

How investors can boost their passive income when the FTSE is falling

Stock markets are plagued with fears right now. Here's why I firmly believe those fears improve our passive income prospects.

Read more »

Image of person checking their shares portfolio on mobile phone and computer
Investing Articles

2 cheap UK shares to buy right now!

Recent market volatility means many top stocks now trade at rock-bottom prices. Here are two cheap UK shares I'm thinking…

Read more »

Rolls-Royce's business aviation engine, the Pearl 700
Investing Articles

The Rolls-Royce share price is just pennies. Am I missing something?

As the Rolls-Royce share price lingers in penny stock territory, our writer revisits the investment case that has attracted him…

Read more »

Compass pointing towards 'best price'
Investing Articles

How to put a valuation on the Woodbois share price

The Woodbois share price has fallen from its recent spike, so should I buy now? And how can I work…

Read more »

Inflation in newspapers
Investing Articles

I’d fight inflation with these 2 FTSE 100 dividend shares

With inflation hitting a 9%, I'm boosting my passive income and turning to these two FTSE 100 dividend stocks.

Read more »

New Ways of Investing - Hands Only Using Smart Phone
Investing Articles

2 cheap Footsie stocks to buy for BIG dividends!

The recent stock market sell-off leaves plenty of top stocks looking too cheap to miss. Here are two great Footsie…

Read more »