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FTSE 100 chief executives see GBP4m fall in value of company stakes in 2008

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Over the first half of 2008 FTSE 100 chief executives saw their personal stake in their companies’ equity drop by an average of over GDP2m each to GDP8.96m, according to research by Hea

Over the first half of 2008 FTSE 100 chief executives saw their personal stake in their companies’ equity drop by an average of over GDP2m each to GDP8.96m, according to research by Heartwood Wealth Management.

Heartwood estimates that between the end of June and the end of October chief executives lost, on average, a further GDP2,230,000 each in the value of their stake, assuming no change in the number of options or incentive plan shares held.
 
The sharp drop in the value of assets held by FTSE 100 chief executives in their companies reverses a five year growth trend which saw their holdings increase nearly fourfold from an average of GDP2.96m in 2002 to GDP11.1m in 2007.
 
Heartwood’s analysis shows that 34 per cent of assets are currently held as shares in chief executives’ own names and the balance of 66 per cent as share options or in long term incentive plans (LTIPs).

The analysis shows that over the past two years there has been a significant shift in value away from shares, which in 2006 accounted for 55 per cent of the value of their assets, towards share options and LTIPs.   
 
Simon Lough, chief executive of Heartwood Wealth Management, says: ‘Sometimes the impression may be given that senior executives have remained untouched by the credit crisis.  These figures belie that impression. 
 
‘Chief executives typically spend about five years in their role. If things are going well, it is often difficult for them to sell down their personal stakes, because it may send the wrong message on the outlook for the company. On the other hand, if they hold on, they can suffer this sort of fall. Our advice to them is usually to establish a regular pattern of modest sales, as a matter of prudent diversification, leaving still substantial exposure. The market can understand and accept this approach, without attributing too much significance to each move.’

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