IRELAND'S PUBLICLY quoted companies might be small by international standards but their top executives take home salaries and bonuses on a par with their global peers, according to a survey just published.

A new report from Hewitt Associates shows that the directors of Ireland's quoted companies achieved an average 12 per cent rise in their basic pay last year and a "staggering" 30 per cent increase when bonuses and other benefits are included.

By comparison, the average rate of increase on fixed salaries for executives in the United States was about 4 per cent, while the European figures ranged from 3.5 per cent to to 7.5 per cent depending on the country.

The figures were compiled up to May 2008 and are sure to stir debate from shareholder groups and pension funds about the level of pay increases awarded to directors here.

The average remuneration for the highest paid director - usually the chief executive - was €1.3 million, according to Hewitt's analysis.

Hewitt avoided listing out the individual payments made to all directors of Irish plcs but it said the average total remuneration paid to directors ranged from €496,000 for the lower quartile of the 69 companies surveyed to €2 million for the upper quarter.

This reflects the different size of the companies, according to Hewitt.

Hewitt director Rachael Ingle said the pay increases were high by international standards but added that they were likely to moderate significantly this year given the economic downturn.

"Our expectation would be that it will come down again to 5 or 6 per cent for fixed pay this year," she said. "There's going to be significant pressure in the current economic climate."

Hewitt found that about 40 per cent of a director's pay is now made up of bonuses and performance-related payments.

This percentage is about 50 per cent for the larger cap companies and about 15 per cent for the market tiddlers.

Hewitt's research shows that more and more Irish public companies are now opting for long-term incentive plans for their executives instead of share option schemes.

About 35 per cent of the companies now use LTIPs to reward directors compared with 20 per cent in 2006.

The LTIPs generally involve the issuing of free shares if certain targets are met, while share options involves granting stock at an attractive price which vests at a date in the future.

The decline of stock market valuations over the past couple of years has resulted in many stock options now being under water, and therefore less attractive as a motivational tool for executives.

A change in accounting standards in recent years also forced companies to calculate the cost of the share options and list that figure in their accounts.

"Hewitt believes LTIPs are a better mechanism for reward," Ingle said.

"Not only are they more cost effective but they also offer more value to shareholders concerned about dilution of shares.

"They more accurately reflect business performance outside market trends, offering more positive returns for the employee. We expect to see a greater shift towards LTIPs over the next few years."

Aer Lingus chief executive Dermot Mannion has benefited from an LTIP scheme and executives at IAWS have been offered a 10-year scheme following its merger with Swiss food group Hiestand.

While CEOs and other executive directors achieved double-digit increases in their salaries, Hewitt's study found that non-executive directors got an average rise of 6 per cent while executive chairman were given an average 5 per cent boost in fees.

More than 25 per cent of Dublin listed companies granted share options to non-executive directors, a practice that is frowned upon in the UK as being against corporate governance best practice.

Ingle said this probably reflected a US influence at some of the companies listed here, given that the practice is more common across the Atlantic.

"In the US it's standard practice so maybe some of the Irish companies are taking their influence from there and some are taking it from the UK, where it's not seen as good practice," she said. "It's a mix of influences at play."

Hewitt's survey illustrates the pecking order among executive directors. Finance directors (FD) generally get about two thirds of the pay awarded to the CEO with the next layer of director getting about 60 per cent.

"The chief operating officer seems to be coming more to the fore than in the past and a lot of companies seem to be equalising their [COOS] pay with the FD, who traditionally would have been considered the number two," she said.

"In the US, the culture is very different. The CEO is the emperor and the difference could be three to five times that of the next best paid director."

According to Ingle, Irish directors are paid more than their equivalents in the UK, when the relative size of the company is taken into account. "They're bigger fish in a smaller pond here," Mr Ingle said. "It's a smaller market with a smaller pool of people so Irish companies have to pay more to get the right people."

Called the Report on Irish Directors' Remuneration 2008, the study looked at the pay of directors at all 69 Irish listed companies, including those on the IEX junior market.

The report found that earnings per share is no longer the only means used to measure performance.

Return on capital employed and other measures are now being used by public companies here.