DIRECTORS PAY IN THE PRIVATIZED UTILITIES

This exploratory paper examines the relationship between the remunerat ion of the highest paid director and company performance in the privat ized utilities. Four conclusions regarding the structure of top direct ors' pay emerge from the analysis. First, the salary plus bonus remune ration of top directors in the privatized utilities has increased by 1 2 per cent per annum since 1990. Second, average employee pay in these utilities has grown by about 3.1 per cent per annum over the same per iod. This suggests that top pay growth in the privatized utilities has outstripped that of the average worker since 1990. Third, the analysi s cannot isolate a robust statistical relationship between directors' compensation and measures of pre-dated company performance. Finally, d irectors' share option dealings can sometimes considerably inflate the ir overall compensation. Taken together, these findings implicitly que stion the current efficacy of remuneration committees for determining boardroom pay in the privatized utilities. One solution, which may ena ble shareholders more accurately to assess executive performance, is f or complete disclosure of all components of directors' pay in the comp any accounts.