The IMS Talent Challenge CEO Reward Analysis Contents

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The IMS Talent Challenge CEO Reward Analysis Contents Acolyte Presents CEO REWARD & REMUNERATION IN THE CONSTRUCTION SECTOR Talent Insight Hub – Salary Benchmarking 2020 1.0 The IMS Talent Challenge CEO Reward Analysis Contents 1.0 PROJECT BACKGROUND 3 2.0 EXECUTIVE SUMMARY 5 3.0 APPROACH 8 4.0 CEO REWARDS IN THE UK CONSTRUCTION MARKET 10 5.0 CEO REWARDS IN THE GLOBAL CONSTRUCTION MARKET 15 6.0 CEO REWARDS IN SIMILAR SIZED COMPANIES 20 7.0 APPENDICES 25 6.1 Remuneration Data 26 6.2 UK Company Profiles 30 6.3 Global Company Profiles 41 6.4 Similar Sized Company Profiles 52 8.0 ABOUT ACOLYTE 63 1.0 Project Background CEO Reward Analysis Project Background PROJECT BACKGROUND With CEOs of the ten largest construction companies in the UK taking home circa £25m between them last year, how does their compensation compare to CEOs of globally leading construction companies and CEOs of similar sized firms in other sectors? The competitive nature of operating in the construction market can create an inflationary pressure on rewards paid to executives. There is a balancing act between aligning a company's success with their CEO’s remuneration (i.e. bonus, stock options etc.) and ensuring that the base salary is competitive enough to attract strong leadership talent. To address this challenge, this whitepaper examines the rewards paid to the CEOs of top ten UK construction companies in the context of both CEO rewards in the the top ten global construction firms and the remuneration earned by CEOs in ten companies of a similar scale across different sectors in the UK. 2.0 Executive Summary CEO Reward Analysis Executive Summary HIGHLIGHTS: EXECUTIVE SUMMARY UK construction CEO average base salary: £0.62m UK construction CEO average package value: £2.50m CEO reward & remuneration in the UK construction sector UK construction CEO avg. reward as a % of revenue: 0.073% The remuneration of CEOs in the top ten construction companies in the UK shows an average basic salary of £0.62m Global construction CEO average base salary: £0.68m with an average total remuneration of £2.50m. While the range of salaries is relatively narrow between (min: £0.51m. Global construction CEO average package value: £4.18m max £0.87m), there is a larger disparity amongst total remuneration packages (min: £0.64m. max: £7.81m). Global construction CEO avg. reward as a % of revenue*: 0.032% Benchmarked against CEOs of global construction companies UK CEO average base salary (similar sized companies): £0.81m With an average base salary of £0.68m and total remuneration is £4.18m, Global CEOs in construction in most regions UK CEO average package (similar sized companies): £3.11m are compensated better than their UK equivalents. The notable exception is China where average total remuneration is UK CEO reward as a % of revenue (similar sized companies): 0.083% not comparable with their equivalents in western economies. The three Chinese construction companies captured in the sample are 2-3 times the size of those in the US, UK and Europe by revenue while their CEOs (from available information) earn an average remuneration of just £160k. An analysis of the remuneration to revenue metric (excluding the Chinese firms) shows the average of the UK based construction firms (0.073%) is higher than that of the global construction firms (0.032%). Benchmarked against CEOs of similar sized companies in the UK The remuneration paid to the CEOs of UK construction companies was lower when compared against a sample of CEOs from similar sized firms across different sectors in the UK. The average basic salary of this sample was 0.81m compared to £0.62m for UK CEOs. The average total remuneration in this sample was £3.11m, compared to £2.50m for UK CEOs. While there is still some disparity amongst total packages in this sample, it is narrower than compared to UK and global construction CEOs, with packages ranging from £1.27m to £6.08m. When the scale of operations is taken into account, the average remuneration to revenue ratio for a UK CEO (0.073%) is marginally lower than the similar-sized firms (0.083%). This indicates that, relative to size of company by revenue, CEOs in the UK construction sector are only marginally less well rewarded than their peers in other sectors. * Excluding China CEO Reward Analysis Executive Summary (Cont.) CEO REWARDS IN THE GLOBAL REWARDS IN FIRMS WITH COMPARABLE CEO REWARDS IN THE UK CONSTRUCTION SECTOR SALES The average basic salary in the top ten construction The average basic salary in the top ten global construction The average basic salary in the similar sized firms in the UK companies in the UK was c. £0.62m and the average total companies was c. £0.68m and the average of total was c. £0.81m and the average of total remuneration was remuneration was c. £2.50m. remuneration was c. £4.18m. c. £3.11m. The highest basic salary was earned by Pete Redfern of The highest basic salary was earned by Marcelino The highest basic salary was earned by Namal Nawana of Taylor Wimpey (£1.03m) and the lowest basic salary was Fernández Verdes of ACS (£1.94m) and the lowest basic Smith & Nephew (£1.6m) and the lowest basic salary was earned by David Jenkinson of Persimmon (£0.51m). salary was earned by LIU Qitao of China Communications earned by David Brown of Go-Ahead Group (£0.57m). Construction Group Ltd. (£0.03m). The highest total remuneration was earned by Robert The highest total remuneration was earned by Geoff Drabble Perrins of Berkeley Group (£7.80m) and the lowest total The highest total remuneration was earned by Richard of Ashtead Group (£6.08m) and the lowest total remuneration was earned by Alain Michaelis of Keller Beckwitt of Lennar Corp. (£14.33m) and the lowest total remuneration was earned by David Brown of Go-Ahead (£0.64m). remuneration was earned ZHANG Zongyan of China Railway Group (£1.27m). Group Ltd. (£0.13m). With respect to the company’s global revenue to rewards With respect to the company’s global revenue to rewards ratio, the % of total remuneration is highest at Berkeley With respect to the company’s global revenue to rewards ration, the % of total remuneration is highest in Serco Groups (0.26%) and lowest at Persimmon (0.02%). ratio, the % of total remuneration is highest in Lennar Corp. (0.18%) and lowest in Babcock International (0.03%). (0.0821%) and lowest at China Railway Group Ltd. (0.0002%). 3.0 Approach CEO Reward Analysis Approach Geography APPROACH The compensation of CEOs among the top UK construction companies was examined to understand the salary benchmark of the CEOs in the UK. In order to be objectively assessed, the remuneration of the CEOs were examined and based on three areas: Sector • Basic salary The compensation of CEOs among the top global construction companies • Total compensation package was examined to understand the salary benchmark of the CEOs globally • Package as a % of their company’s and thereby recognize the difference in salaries in the UK and the global market. revenue The test was conducted among: • CEOs in the UK construction sector Scale of Organisation • CEOs in the global construction The compensation of CEOs in UK is compared to that of CEOs of similar sector sized companies with similar revenues irrespective of the industry. • CEOs in firms of a similar size 4.0 CEO Rewards in the UK Construction Market CEO Reward Analysis CEO Rewards in the UK BENCHMARKING CEO REWARDS IN THE UK CONSTRUCTION COMPANIES The compensation packages for CEOs of the top ten construction companies in the UK have been examined. The average basic salary is £0.62m with total rewards averaging £2.5m. The basic salaries vary between £0.51m and £0.87m. However, total remuneration varies significantly with the lowest in the sample being £0.64m (Alain Michaelis of Keller) and highest being £7.8m (Robert Perrins of Berkeley Groups). CEOs’ salary as a percentage of company’s revenue helps in understanding the reward in the context of organisational scale. On average, a CEO in a UK based construction company earns 0.073% of its company’s revenue. Robert Perrins’s (Berkeley Group) remuneration ratio comes out on top at 0.264%, whereas Persimmon’s David Jenkinson’s ratio is the lowest at 0.018%. The reason for the low ratio for David Jenkinson is because he joined on 1st January 2019 and was not eligible for a bonus that year. CEO Reward Analysis CEO Basic Salaries in the UK A comparison of the basic salaries among the CEOs of UK based construction companies BASIC SALARY CEO & ORGANISATION (£M) 9. 00 Pete Redfern (Taylor Wimpey) 0.87 8. 00 Leo Quinn (Balfour Beatty) 0.80 7. 00 David Thomas (Barratt Developments) 0.74 6. 00 5. 00 Haydn Mursell (Kier Group) 0.62 4. 00 Robert Charles Grenville Perrins (Berkeley Group) 0.55 BASIC SALARY (£M) SALARY BASIC 3. 00 Jason Honeyman (Bellway) 0.53 2. 00 Peter Truscott (Galliford Try) 0.53 1. 00 Average Basic Salary = £0.62m Alain Michaelis (Keller) 0.53 0. 00 Pete Redfer n Leo Quinn David Thomas Haydn Mursell Robert Charles Jason Peter Truscott Al ai n Michaeli s John Morgan David (Taylor Wimpey) (Balfour Beatty) (Barratt (Kier Group) Grenville Honeyman (Galliford Try) (Keller) (Morgan Sindall) Jenkinson John Morgan (Morgan Sindall) 0.52 Developments) Perri ns (Bellway) (Persimmon) (Berkeley Groups) David Jenkinson (Persimmon) 0.51 AVERAGE 0.62 SEE APPENDIX 1 CEO Reward Analysis Value of CEO Packages in the UK A comparison of the remuneration packages among the CEOs of UK based construction companies CEO & ORGANISATION PACKAGE VALUE (£M) 9.
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