Making hay while the sun shines
Published: 25 June 2008
Although most CEOs have seen doubledigit pay rises, if the current environment continues, next year’s list could have a very different look to it. James Phillipps reports
A year of record-breaking profits for many of the leading recruitment firms was reflected in the bumper boardroom pay-outs seen across the industry.
The top earners were once again to be found at financial recruitment specialists Michael Page, with its three executives each pulling in over £2.2m apiece.
The trio all earned a bonus that matched their salaries — the maximum allowable under the company’s remuneration structure — for the third consecutive year. Michael Page enjoyed record-breaking pre-tax profits of £147.4m in 2007, up from £97m the previous year. Despite this, its share price has more than halved over the past 12 months as market sentiment has turned.
The company still felt justified in rewarding its executives further, however, and forked out £3m, split between them, as a deferred bonus paid in the form of shares.
This was up from a shared pot of £1.7m last year and helped chief executive officer Steve Ingham’s earnings soar by almost a million to a whopping £2.6m. His salary actually only made up £360,000 of his total package.
Colleagues Charles Henri-Dumon, managing director, Europe and the Americas, and Stephen Puckett, group finance director, earned £2.3m and £2.2m respectively,with both seeing their remuneration rise by £600,000 year on year.
The industry’s millionaires’ club gained a new member in 2007, with Hays chief executive Denis Waxman’s remuneration moving into the seven-figure bracket. He took home £1.2m, which should help ensure he has a comfortable retirement.
Waxman stepped down after the group’s AGM last November and was replaced by Alistair Cox. Cox earned £724,590 as chief executive of Xansa in 2006, so it will be interesting to see how his remuneration compares, come Hays’ report and accounts next year.
Francesca Robinson, the chief executive of OPD, was once again the top-earning female in the sector. She earned £821,000 in 2007, up from £776,000 the previous year. For the second year running she received a bonus equal to her base salary — £395,000 — after the firm reported profits of £15.3m, up 22% year-on-year, and ahead of its £15m forecast. At this rate, Robinson is likely to be earning £1m plus within the next three years.
Although only four executives took home pay packets in excess of £1m, several cashed in shares that brought their total gains for the year above the million mark. Most of the executives at the listed recruitment firms receive share options as part of their remuneration, butthese are not included in the table. Share options grant the holder the right, but not the obligation, to buy shares in the company at a predetermined price. These can be extremely lucrative if the share price rises above the strike price.
A number of executives took advantage of the strong share prices seen across the sector in the early months of the year, exercising these in anticipation of share prices weakening, which they did in the second half of the year, amid concerns about the economic slowdown. The scrapping of taper relief on capital gains in April also prompted many to cash in the first quarter.
Robert Walters, the eponymous founder and chief executive of the firm, led the way once more in 2007. He sold just over 1.5m shares, which netted him £3.27m. This dwarfed his £955,000 remuneration package, meaning that once again he was the industry’s overall top earner, taking into account options and shares.
It was the same story in 2006, when Walters made a staggering £9m from the sale of shares, on top of his then £909,000 salary package.
Two of his fellow executives also made over £1m from the exercising of options in 2007. Giles Daubeney, the company’s chief operating officer, made £1.8m, while Ian Nash, the former group finance director, made £1.09m.
All four members of the millionaires’ club also exercised options on several hundred thousand shares last year.
At Michael Page, Steve Ingham made a cool £737,000 from exercising options on 284,000 shares, on top of his £2.6m emoluments. Managing director, Europe and Americas, Charles-Henri Dumon profited even more, gaining £1.7m by exercising 540,000 options. Group finance director Stephen Puckett also netted £738,000 by exercising 284,000 options.
The dominance of Michael Page in the boardroom salary stakes provided some continuity in an eventful year for the sector that saw a host of merger and acquisition activity and several firms changing chief executive.
Peter Searle, chief executive of Spring, puts much of this down to a combination of the credit crunch and a lot of private equity and hedge fund money washing around the market, consolidating smaller players into new and larger groups.
“Cashflow is the lifeblood of the industry, and companies with large debts have been struggling because of the banks closing shop due to the credit crunch. It is even more difficult for the smaller companies to survive, which has been another factor driving consolidation,” he says.
Spring acquired Glotel in July, and several other corporate names from last year’s survey have disappeared into the ether.
The merger of Corporate Services Group (CSG) and Carlisle led to the formation of Impellam, which saw two of last year’s top earners scrubbed from the list this year. A spokeswoman for Impellam says: “CSG did not publish its report and accounts this year and Carlisle is not obliged to publish this information.”
Many interested observers will be eagerly awaiting Impellam’s first annual report, which should detail both chief executive Desmond Doyle’s remuneration and how much Tony Martin received after stepping down as chairman of CSG.
Elsewhere, the acquisition of Quantica by Berkeley Scott resulted in the combined group being renamed the Kellan Group. John Rose was appointed chief executive in May last year and earned £138,800, although this sum only covered the last eight months of the firm’s accounting year. This was considerably less than the £371,00 Les Lawson earned as chief executive of Quantica in 2006, but compared to the £141,818 former Berkeley Scott chief executive Roddy Watt earned, it would work out more if it were over a full year and not the eight-month period. Rose also bagged 1.1m share options, which could massively boost his future remuneration.
Servoca and Synarbor are another two new company names in this year’s table.
Servoca was formed from the reverse takeover ofMulti Group by Dream Group last June, while Synarbor was the new corporate identity adopted by Public Recruitment Group following the sale of its healthcare division and restructuring in October last year. Five of Synarbor’s executives quit last year following boardroom reshuffles, which cost the company £1.2m in compensation pay-outs.
Several other companies that changed directors also had to make significant pay-outs, including Kellan Group, which paid off one unnamed director with £225,000 as part of the £646,000 redundancy costs it shelled out last year. Hays is also set to continue paying Waxman, who retired as chief executive last November, salary and benefits until 6 June, 2008.
In the sector, M&A activity also saw Imprint taken private after being bought by Premier UK, while Lorien was snapped up by Lincoln-based Contracting Solutions Group last year for £18.6m.
Several companies may have enjoyed record profits in 2007, but the picture was altogether different at Hat Pin, which went into administration last month. Greatfleet also had a tough time, making a loss of £1.66m and being forced to admit that it had previously overstated its revenues. Its full year accounts, which are due out later than usual in mid-June, could make for interesting reading.
Although most chief executives saw healthy doubledigit pay rises, there were some notable exceptions. Russell Clements, chief executive of SThree, saw his remuneration drop from £536,000 to £411,000. This is due to him earning a more modest bonus of £111,000 last year, down from £250,000 in 2006, the company’s maiden year as a listed entity.
At ATA, Andy Pendlebury earned £62,000, compared to the £123,000 earned by Andrew Bailey the previous year. However, Pendlebury only replaced Bailey, who moved across to become chief operating officer, in October 2007.
The company’s accounts only cover the period to 31 December 2007. Similarly, David Pye, who was appointed chief executive of Highams on 3 January 2008, earned £45,000 compared to the £153,000 earned by Ted Andrews the previous year. But again, this is because the company’s
accounts run until 31 March.
Curiously, Andrews also changed roles to become chief operating officer. He remained the top earner at Highams with a total remuneration package of £149,000. Executive director Gary Burbidge, actually took home more though, with his £124,000 package being boostedby a severance payment of £100,000 after he resigned
last March.
Indeed, chief executives were not always the best-paid board members. Over at Northern Recruitment, founder and chief executive Lorna Moran was paid £105,000, as she was the previous year, while executive director Therese Liddle earned £142,000.
Meanwhile, at OPD, Baroness Virginia Bottomley enjoyed a base salary of £280,000 with a matching bonus and other benefits, which took her total remuneration to £562,000. Although this was less than Robinson’s £776,000 package, the former health minister also received a cash payment of £193,000 and loan notes to the value of £258,732. These relate to OPD’s acquisition of International Resources Group in December 2005.
Looking to the future, Ingenious Asset Management managing director Guy Bowles believes the recruitment sector faces a challenging year.
He says: “The industry faces the difficulty of people being less likely to move in such a challenging environment and saying, ‘Better the devil you know’.” Searle adds that companies reliant on the SME market will struggle, which plays into the hands of companies with a blue-chip client bank.
If the current environment continues, more consolidation is likely, meaning next year’s survey could be an even more concentrated affair. Whatever happens, the gap between the top and bottom-earning executives is only likely to widen further.
| Job Title | Job Location | Job Position |
|---|---|---|
| Operations Director/Divisional Manager... | All | Permanent |
| Sales or Marketing Recruitment... | North West | Permanent |
| Manpower Professional – Branch Manager... | North West | Permanent |
| Senior Consultant... | South East | Permanent |
| Team Leader/Senior Consultant... | Scotland | Permanent |
| Work Life balance in London...YES in... | London | Permanent |
