Pockets full of cash

The size of boardroom pay packets has long been a contentious issue, particularly at the top end of corporate life. But trends in directors’ salaries at the smaller end, on the AIM market for example, can be just as illuminating. Small companies wondering what to pay their leaders can use analysis of the AIM market as a useful benchmark.
The Directors’ Salaries on AIM 2006 survey, the fourth on this topic produced by Business XL’s sister publication Growth Company Investor in association with Halliwell Consulting, shows that, while the average pay of AIM company executives has increased for the first time in two years, share price performance did not necessarily perform in line with remuneration. So, if you had invested in September last year in the ten AIM companies with the highest-paid chief executive officers, the chances are you would have done no better and probably worse over the following 12 months than if you had gone for the ten companies at the other end of the boardroom pay league.

Leaps and bounds
As Table 1 shows, Allan Kerr, chief executive officer of metals trading group Wogen, which floated on the junior stockmarket at 122p in October last year, saw his salary for the year to September 2005 leap from £657,000 to £2.5 million, following a jump in pre-tax profits from £9.6 million to £23.2 million. The shares peaked at 187.5p in January, but later headed south on deteriorating trading conditions and plunging interim figures to 70p and lower.

Consolidated Minerals, Australian-based nickel and manganese group, paid its chief executive Michael Kiernan £1.65 million in its last full financial year, much of it in the form of a ‘termination payment’, while its shares fell 37 per cent from September to September and now at 79.5p are less than half their 2005 peak. NETeller, a strongly performing online money transfer specialist, paid its own chief executive officer £834,600 last year, but the US Unlawful Internet Gambling Enforcement Act has forced the company to re-think parts of its business model and sent its shares down 44 per cent over the period surveyed — at 146.75p they are now a fraction of last year’s 919p high.

By contrast, Table 2 shows that Albidon, an Australian nickel explorer in Zambia and elsewhere in Africa, paid its managing director a modest £8,800 in the year under review, making him the third lowest-paid boss on AIM. Nevertheless, encouraging drilling results from the company’s projects sent the shares up 195 per cent over that period and have left them at 58.5p more than double their level a year ago.

Your Space, which provides office accommodation for smaller companies, paid its chief executive officer an undemanding £12,500, yet saw its shares gain 196 per cent between September 2005 and September 2006. Since then, they have advanced another 50 per cent to 110p. Rurelec, an adventurous group pursuing electrification projects in South America, paid its chief executive officer, former maverick financier Peter Earl, a modest £14,000 in the year under review, making him the ninth lowest-
paid boss in the market. But the shares have been among the market’s better performers. ‘When Rurelec came to market in 2004, we had relatively low aspirations,’ says Earl, ‘but we wanted to demonstrate as a board that we were dedicated to the business and that we were looking to encourage rapid growth.’

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