Bonuses at all-time high

A new bonus bonanza is sweeping Britain's boardrooms, a major survey reveals today.

Bonuses being paid to company chief executives have risen to an all-time high and are replacing share options and pension fund top-ups as the favoured form of remuneration, the research shows.

Research from the Hay Group of remuneration advisers reveals how the typical maximum bonus for FTSE 100 directors has soared from 60 per cent of salary to 100 per cent over the past two years.

The bonuses went up even in "what was seen as a poor year for business", the report says. The trend is bringing to the boardroom the City phenomenon of massive cash bonuses that dwarf executives' basic salaries.

However, whi le City bonuses are only slowly recovering after big falls in the stock market, their company counterparts are at a record high.

The bonanza was highlighted yesterday when Barclays revealed a cash award of more than £1.9 million to chief executive Matt Barrett. This came on top of a salary of £1.1 million and contributed to a total package of almost £5 million.

It also emerged that Sir Roy Gardner, chief executive of Centrica, had his basic pay of £768,000 topped up with an 89 per cent bonus of £662,000.

Last month it was disclosed that Sir John Bond, chief executive of HSBC, received a £1.1 million bonus in 2003 - more than his basic annual salary of just over £1 million.

Other 2003 accounts of wellknown companies, due to be filed over the next few weeks, are expected to show the same trend. But the bonuses face scrutiny by shareholders and bodies such as the National Association of Pension Funds to see if they are justified by performance.

They have also been attacked by unions who said that workers should also be rewarded if the company's performance has improved. Remuneration experts say companies are increasingly relying on bonuses because so few executives now wanted discredited share options.

Gordon Brown's £1.5 million cap on executive pension pots has lessened the attraction of topping up final salary schemes as a way to give "disguised" pay rises.

Simon Garrett, associate director of the Hay Group, said the bonus boom raised worrying questions about the way in which top directors, particularly chief executives, are being rewarded because of potential conflicts of interest. "These bonuses are usually paid for meeting operating targets or other objectives set, in reality, by the chief executive."

Top headhunter Carol Leonard of Leonard Hull International, said share options, which are only triggered when the company's share price reaches certain levels, were out of fashion because they were so vulnerable to the "vagaries of the stock market".

Cash bonuses were now seen as "a much more reliable way of motivating people," particularly when they were paid out only after four or five years of hitting performance targets, she added.

Whereas contracts offering maximum bonuses of 50 to 60 per cent were the norm five years ago, most directors now negotiated packages allowing 100 per cent or even openended bonus payments, she said.