Pay and perks at the top

Share options have dramatically increased in popularity over the past year. According to the Hays Montrose/Building salary guide, the option to join share programmes is being given to more directors lower down the executive ladder. The increase in executive salaries is steady, but has slowed compared with the 1998-99 rises. Housing sector chiefs saw salaries swell 4% on last year, compared with 8.6% for 1998-99. Civil engineering executives' fortunes are picking up: for the first time in two years there were salary increases of about 5% for all positions.

The trend towards share options is reflected across all sectors in construction, and companies with a turnover of between £26m and £100m show the greatest increase in take-up. The emphasis indicates that companies are thinking more about how to reward executives in the long run, and so retain them for longer in an increasingly competitive labour market.

Geraint Day, business research executive at the Institute of Directors, explains: "If you give executives a share option, you include them in the long-term prospects of a company. It directly links performance to reward."

Chris Chetam, senior manager at Hays Executive International, agrees. "There is a need to retain senior staff. Share options mean that in four or five years' time, senior executives could come into a lot of money."

Share options are popular with new companies and dot-coms. But, according to Chetam, construction companies have lagged behind other industries in using them. "Previously the focus in construction was on turnover and profit, but there is a realisation that share prices are instrumental in determining a company's future," he says.

Chief executives in the smaller housing and building companies received the smallest rises. A typical chief executive of a building firm with a turnover of less than £25m pocketed an income of £84 000, a 5% rise on 1999 but 9.2% lower than the increase in 1998-99. Chetam believes this could be linked to the growth in popularity for share options. "Executives could be receiving their rewards in different ways. I don't think the statistics mean there's a slowdown in the building and housing sectors."

Chief executives and board directors in civil engineering have seen salary increases above the rate of inflation, after the government announced a comprehensive spending review and allocated £40bn to public transport earlier this year. Share options have also become more popular in this sector, particularly among companies with a turnover of £26-100m. Industry consensus is that share options are good news.