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US executives take home the fattest pieces of bacon
Company bosses around the world are being rewarded generously for their efforts, writes MARCIA KLEIN
US EXECUTIVES earn the most in the world, followed by those from Argentina, Mexico and Japan, a recent remuneration survey shows. Kris Crawford, managing executive of FSA-Contact's Remuneration Information Services, says comparisons between different countries are always difficult "not only because of the difference in currencies, but also in terms of determining the purchasing power of salary packages." But the survey, by FSA-Contact's international associate, Watson Wyatt Worldwide, does show there are huge differences in the way total packages are made up and in their values based on current exchange rates. The research, conducted in 12 major industrialised countries (but excluding South Africa), shows that Japanese and Argentinean managing directors receive a far higher base salary than their counterparts elsewhere. When total remuneration is adjusted for purchasing power parity, executives in most countries earn the equivalent of around $250 000 a year. Executives in Mexico, however, earn nearly $300 000. Those in Argentina earn even more, while US executives are the most highly paid, earning about $350 000 a year. The survey does not include SA companies, but a recent study by Deloitte & Touche shows that top executives can earn packages of R300 000 and up. Informal estimates are that packages at the top levels can run into millions after share options, performance bonuses and other perks are taken into account. These pale into insignificance compared with some US and UK financial executives, who reportedly got bonuses upwards of R14-million last year, bringing their annual salaries to the equivalent of tens of millions of rands. Watson Wyatt Worldwide director Mark Allen says more and more companies are using long-term incentives, particularly stock options, "but most countries still lag far behind the US in this regard". Performance bonuses as a percentage of basic pay range from 15% to 30% (with most leaning towards 30%), and bonuses in Asia are higher than in Europe. Crawford says that in South Africa there is a growing trend towards including performance bonuses in total remuneration packages. These bonuses are between 10% and 25% of basic salary, lower than the international average. The Deloittes' study shows that about 55% of all SA organisations have some form of performance-based pay for senior executives, the most popular being company-based profit-share schemes. Deloittes says a recent study of a small cross-section of companies shows that at top executive level the value of share options adds 14% to 26% to the company's annual total cost of employment. If South Africa follows international trends "guaranteed remuneration could fall by up to 40% of current levels", but performance-related pay is expected to increase significantly. Deloittes says "creation of shareholder wealth is likely to be the most meaningful standard against which executives are measured". There is also a growing trend to spread executive bonuses over three to five years, to encourage a good long-term performance and to "lock senior staff into the company in the long term". In South Africa, salary levels of top management have been boosted by the "brain drain". Apart from the usual perks, financial professionals are also being offered "golden hellos", joining bonuses to make up for unexercised share options.
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