Every time the share price of his company rises 1 per cent, Jean Pierre Garnier, Glaxo-SmithKline's new chief executive, is £1 million sterling richer. On the same basis, WPP's Sir Martin Sorrell makes about £800,000, while Sir John Browne at BP gains around £300,000.
And an entirely good thing it is too, according to a research report from Deutsche Bank, which argues that highly-paid, highly-motivated bosses drive wealth creation in our society - more fit cats than fat cats.
Linking pay and performance is nothing new. In the US, there is a body of academic literature stretching back to the early 1970s that has found a positive correlation between the degree of performance-based remuneration and stock market performance.
US companies have, by and large, been acting on this theory since the 1980s. In Britain and Ireland performance-linked pay has mushroomed in the last few years. What is new, however, is that Miko Giedroyc, Deutsche's London-based new economy analyst, has attempted to quantify the leverage between shareholder value - as measured by total shareholder return - and chief executives' remuneration for Britain's top 100 companies.
To do this, he has invented two new measures: the "CEO delta", which is the rise in the boss's net worth on a 1 per cent rise in the share price - on paper, of course, until he or she cashes in; and the "CEO delta/wealth ratio", which takes account of the fact that a company head who is 10 times as wealthy will need 10 times as much delta to feel equally motivated.
Mr Giedroyc's figures contain some heroic assumptions, which is hardly surprising given his limited data, so the guesstimates for individual companies and managers are just that. He is confident, however, that the numbers for the FTSE 100 as a whole, and for different sectors within it, are fairly accurate.
The results are unequivocal. A typical 50-year-old FTSE-100 chief executive in 1990 had little incentive, with a delta of two to three and a delta/wealth ratio of just 0.23 per cent. In other words, a 1 per cent rise in the shares would have brought him just £2,000£3,000, increasing personal wealth by a quarter of a percentage point.
Since then, however, companies have not only boosted their use of cash bonuses, share options and deferred share packages, but also - even more importantly - attached performance criteria to them. The combination has hugely increased a chief executive's leverage to shareholder returns.
By now the typical delta ranges between £45,000 and £71,000, depending on length of tenure, with a 1.5 per cent delta/wealth ratio. Not surprisingly, the UK figures pale in comparison with those from the US. Potentially, these ratios help to shed light on some of the characteristics of the bull market of the past 20 years.
Take the outperformance of large companies. The bigger companies can afford bigger deltas, and the ability to offer more incentive is an important competitive advantage.
The same thing may be behind the better returns of the technology, media and telecoms (TMT) sectors. By contrast, the average delta of the big utilities is just £23,000 and among mortgage banks a laughable £4,000. Predictably, these sectors have been generally lamentable performers.
This leads naturally to the hegemony of the US over the past decade and more. Not only are big US companies bigger - the median Dow stock is 15 times larger than the median FTSE-100 - US companies have also been paying their bosses better for much longer.
Since this creates a virtuous circle, where higher CEO pay leads to better stock performance, further increasing pay and wealth, it suggests that the US will continue to extend its lead, with Europe and Japan, where the idea of high remuneration packages still carries social stigma, falling further behind.
The UK may be a special case. Given that it leads the way in designing stringent performance criteria, British companies can create similar chief executive leverage and incentive as US ones, with far smaller absolute amounts.
Beyond their explanatory power, Deutsche believes that these tools should also be excellent at predicting stock performance: companies with the highest deltas should do best. Mr Giedroyc has not yet tackled the mammoth task of providing empiric proof, though his thesis makes instinctive sense.
