In posts No. 26/09 and No. 62/09 I wrote about reports by the Dutch newspaper De Volkskrant, concluding that (i) while director compensation in 2008 tanked with 21% to an average of € 3 million, mainly due to dropping bonuses (32% to an average of € 813.000) and share/option related profits (29% to € 969.000), (ii) the amount of exit bonuses went up. Now there's new data, that may tweak things a little bit.
I'm referring to brand new research by The Netherlands Bureau for Economic Policy Analisys into renumeration of the top-directors in large non-financial companies (Hoge Bomen in de Polder. Globalisering en topbeloningen in Nederland). The Bureau has found that as of the late 90s the renumeration numbers in this part of the economy have grown more than average. Whereas the rise of director pay in non-listed companies seems to be caused by the growing size of the company, the rise of director pay in listed companies seems to be linked less to the size of the business (and more to, quite simply, bigger US$ or € numbers in the monthly pay-slip).
Sinds eind jaren negentig is het loonaandeel van de 0,1% van de Nederlanders met het hoogste arbeidsinkomen toegenomen van 1,3% naar 2,0%. Deze ontwikkeling is in andere West-Europese landen eerder begonnen dan in Nederland. Het inkomensaandeel van de 0,1% met het hoogste inkomen ligt in Nederland verhoudingsgewijs op een laag niveau.
Dit CPB Document analyseert de oorzaken van de groei van topbeloningen in Nederland. De beloningen van topbestuurders bij ongeveer 600 grote ondernemingen in Nederland groeiden met gemiddeld 5,8% nominaal per jaar tussen 1999 en 2005. Na aftrek van 2,9%-punten inflatie, kan 2,6%-punten verklaard worden uit schaalvergroting van ondernemingen en 0,2%-punten uit vergrijzing onder bestuurders. Ter vergelijking: de mediaan van de beloning groeide in deze periode met gemiddeld 3,1% nominaal per jaar.
De beloningsgroei bij beursgenoteerde ondernemingen is met 8,9% per jaar bovengemiddeld. 4,8%-punten van deze groei kan worden verklaard door inflatie, schaalvergroting en vergrijzing. Voor 3,9%-punten is geen verklaring gevonden. Gemiddeld ligt de beloning van een bestuurder van een beursgenoteerde onderneming 25% tot 52% hoger dan bij vergelijkbare onderneming zonder beursnotering.
Het beloningsverschil tussen ondernemingen met en zonder een Angelsaksische eigenaar wordt kleiner. Bij ondernemingen met een Angelsaksische eigenaar ligt de beloning van topbestuurders 20% hoger dan bij vergelijkbare ondernemingen met een eigenaar uit een niet-Angelsaksisch land. De loongroei bij bedrijven met een Angelsaksische eigenaar is met 4% per jaar lager dan gemiddeld. Het aandeel van buitenlandse bestuurders blijft gemiddeld genomen constant, maar neemt af bij bedrijven met een Angelsaksische eigenaar.
Good stuff. Here are some key findings.
(a) Until 1998, the 0.1% of the working people with the highest pay earned 1.3% of the total income earned by all the working folks. As of 1998, the income share of these big earners has increased to 2.0% in 2006; in that year, the top 0.1% earned 20 times the average pay. The Bureau concludes that this 20x factor is still pretty small compared to for example Germany (40x) or the US (almost 80x), finding that the increase found in the Netherlands isn't a unique development. Apparently, the numbers - related to this lucky 0.1% - have been growing in the US and the UK since 1980 and in Sweden since 1990.
(b) Between 1999 and 2005, the nominal growth of the top-director renumeration in the Netherlands has been 6% per year on average, while the average increase in pay in the Netherlands was 3%. This rise seems to be caused by growth of business, which in turn is linked to globalisation (allowing the most productive enterprises to realize more output on bigger product markets).
(c) Between 1999 and 2005, director pay in listed companies was a whopping 52% higher than director pay in similar but non-listed companies. This dichotomy seems to be growing, as the nominal growth in pay in listed companies is 9% per year, higher than the average growth of 6% in all large companies. Which is remarkable, as the growth in company results at listed companies is lower. Apparently, about half of the growth in director pay at listed companies can be explained by inflation and growth of business; for the remaining half, no market based explanation could be found. Which suggests, according to the Bureau, that the market for top-directors functions less well at the level of listed companies than at the level of non-listed companies.
(d) In the public sector (covered by me here and here), pay of the top-segment doesn't keep up with the average pay, let alone with the pay of the top-segment in the private sector (see above).
(e) Companies with a US or UK based shareholder constituency (I guess the Bureau simply refers to US or UK based companies), director pay is 20% higher compared to similar companies with a non-Anglo American shareholder base. But as the growth in pay at Anglo-American companies is below average, the distance between US/UK based on non-US/UK based companies in this respect is decreasing.
(f) Despite this decreasing distance (see (e)), the number of foreign directors in the larger Dutch companies has not increased. Between 1999 and 2005 the numbers have roughly remained the same. On the flip-side: the number of Dutch directors at foreign companies is decreasing. The Bureau has also found that the average length of the director stay at companies hasn't changed either. All of this leads the Bureau to finding this data inconsistent with the image that the market for top-directors is becoming more and more international: the influence of globalisation on director pay is channeled through cross-border competition on product markets, not through internationalization of labor markets.
For those readers who like number crunching and want to take a real dive into the nitty gritty of the numerical details, go here and eat your heart out (Dutch only).
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