AIM-quoted companies are expected to review the way they remunerate their directors in light of declining share values and increased scrutiny of executive pay, according to research conducted by PricewaterhouseCoopers (PwC).
The accountancy firm’s report, Aim – the state of play, also suggested that public and governance pressures in other sectors “spilling over” to AIM has put further pressure on junior market companies to re-evaluate the way they reward directors and employees.
Salary levels in AIM companies broadly increase in line with market capitalisation. The report found that average salaries for chief executives and finance directors of firms with a market capitalisation of less than £15m were £157,000 and £104,000 respectively. At the other end of the scale, for firms with a market capitalisation in excess of £200m, the corresponding median salaries were £320,000 and £196,000.
The average maximum bonus potential for both roles was 60%, a lower level than their FTSE counterparts enjoy.
The review also found that salaries of directors of AIM-listed companies reached a new high in 2008/09.
David Snell, AIM leader at PWC said: “The AIM market is at a significant point in its 15 year history, with early signs of market recovery. With many companies still suffering from depressed share prices, finding appropriate executive incentivisation whilst managing investor sentiment will be a critical success factor for companies.”
Paul Wolstenholme, the accountancy firm’s reward director said that changes to executive pay could prove unpopular unless remuneration committees demonstrate that there is a strong business justification for them.
“Any changes should be focussed on performance-based elements of remuneration such as bonus or equity incentives. This should also lead to a greater proportion of an individual’s remuneration package being linked to short and long-term value creation,” he said.
Wolstenholme added that institutional shareholders and regulators are taking a more active involvement in governance and remuneration at AIM companies.
“We believe that this will lead to remuneration committees reviewing current arrangements to ensure that top performers are appropriately retained and motivated whilst ensuring that there is a clear relationship between pay and performance taking into account both the risk profile of the company and value created for shareholders,” he said.
Separate research released today suggested that optimism is returning to the junior market.
The Taking Aim survey, conducted by law firm Faegre & Benson and accountants Baker Tilly, polled 110 AIM companies, 30 institutional investors and 10 AIM specialists.
A majority of both institutional investors (63%) and AIM companies anticipate an improvement in AIM’s performance over the next 12 months, with many expecting a full recovery in market valuation and levels of activity.
Two thirds of the UK AIM companies surveyed said that they have considered or would consider AIM for further funding in the next year.
© Crimson Business Ltd. 2010