FDs have fewer beans to count

Spare a thought for beleaguered FTSE 100 FDs, who may have lost about £900k each last year...

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Last Updated: 31 Aug 2010

Finance directors at the UK’s 100 biggest listed firms saw their own equity stakes plunge in value by a combined £40.2m in 2008 as the stock market went downhill, according to wealth manager Heartwood. That’s more than £400,000 each, for the non-mathematicians among you. So if it wasn’t bad enough presiding over a period in which billions of pounds of shareholder value was destroyed, they also had to suffer the indignity of losing pots of their own cash. Though on the plus side, they might be in with a better chance of promotion now...

In fact, the overall picture is actually even worse for our poor FDs, since they’ll only have a relatively small proportion of their company-linked assets held directly in shares – about one-fifth, usually. The rest is tied up in long-term incentive schemes and share options, which are also looking a lot less lucrative than they were a couple of years ago. All in all, Heartwood has calculated that the average FD saw their total assets in the company fall in value from £3.2m to £2.3m – leaving them £900,000 out of pocket.

Now you might well argue that this doesn’t exactly leave them on the breadline. £2.3m is still a pretty decent nest egg, particularly given that the average FD will typically only spend about three years in the role. Heartwood points out that it’s not easy for them to get their hands on this money while they’re in the job: if they start flogging their shares suddenly, it might spook the market, so they often end up hanging onto them and suffering alongside shareholders (quite right too, you might think). But at a time when the likes of Sir Fred Goodwin have focused so much attention on ‘rewards for failure’, it sounds like our top bean-counters aren’t doing too badly.

In fact, our current economic problems could even turn out to be an opportunity in disguise. When times are tough, money is tight, and cuts are needed, companies will often turf out the old CEO and promote an FD to the top job – just like 3i has done with Michael Queen (who actually replaced another ex-FD in Philip Yea). So even if their share options took a hit, last year may have done wonders for FDs’ career prospects....


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