PwC report predicts drop in real estate executive pay and bonuses

08:31 | 15.06.09

In
a report -‘The state of pay: Real estate executive remuneration’ -
published today it said that the median salaries for a real estate
chief executive and finance director are £405,000 and £300,000,
respectively.

The report showed that average individual salary
increases have dropped below 5% for the first time since 2004 and
further inflationary level increases and pay freezes are likely.

'A
maximum potential bonus of 100% of salary is becoming the norm with the
median actual bonus payout projected at 43% at executive committee
level,' it said.

The PwC paper is the first in a series of
monthly reports that will consider sector-specific reward data and key
trends. It follows the House of Commons Treasury Committee report
‘Banking crisis: reforming corporate governance and pay in the City’
and looks specifically at remuneration issues for companies dealing
with residential and commercial property and land.

Marcus Peaker, reward partner, PricewaterhouseCoopers LLP, said:
'While the real estate sector outperformed the FTSE All-Share at its
peak, it has since fallen sharply below the index. Against this
backdrop of falling profits and share prices, those making decisions
about executive reward in this sector are starting to feel the same
downward pressure and scrutiny that their financial services
counterparts have been subject to over the last year or so.

'
Land and property companies will need to consult carefully with
shareholders if they are to continue to use reward to align and
motivate their executives.

'The key challenge this year
will be setting both the appropriate types of bonus performance targets
and level of those targets – companies’ financial performance
conditions will become increasingly linked to survival rather than
growth.'

He said around two thirds of total compensation is
performance-based in the real estate sector. For a chief executive, an
average of 63% is based on variable components, such as bonus and share
incentives. For a finance director, this figure is 66%.

While
maximum bonus potential continues to rise, with the majority of quoted
companies in and beyond the real estate sector operating a policy of a
bonus maximum of 100% of salary, actual bonus payments decreased in the
last financial year due to major falls in asset values during the
period.

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