Independent Remuneration Solutions, a pay consultancy, and Manifest, a proxy voting agency, number-crunched 800 annual reports for 2003 and found that chief executives of one in four large companies were paid almost twice as much as the next highest paid director.

The picture in companies of market capitalisations of less than £3bn was different. There, chief executives were paid up to 30 per cent more than the next highest-earning boardroom colleague.

But what to make of the findings? Cliff Weight, director of IRS, said big boardroom differentials made it harder for internal candidates to make it to the top.

"Companies get into a mindset that they need an expensive outside hire to fill the role of chief executive," said Mr Weight. That, say some, is not always good.

Research published last week by Booz Allen Hamilton, the management consultancy, showed that chief executives hired from outside did not perform as well as leaders groomed from within and were forced out of office more often.

The Booz Allen research, based on 237 company bosses who left office last year, showed that chief executives who had previously led other companies delivered returns for investors 3.7 per cent per year lower than first-timers.

The IRS survey also found that pay for company bosses had increased significantly during the past five years, with the largest increases going to chiefs of the biggest companies. Total remuneration awarded to chief executives of smaller companies went up 48 per cent over the past five years against 168 per cent for those leading the largest companies.

IRS bases its findings on the total remuneration awarded to an executive during the year. The figure includes basic salary, benefits and annual bonus, which have to be set out in the annual report, and "hidden" amounts on the expected value of long-term incentives, shares and share options.

The figures in the inaugural survey do not, this year, include the transfer value of a pension pot. IRS said the average total pay for a chief executive of a smaller company, defined as those with a market capitalisation of less than £30m, last year was £187,000 while star chief executives pocketed an average £2.6m.

Mr Weight said: "Total remuneration grew much faster in the largest companies. But there was a trickle down effect as smaller companies reviewed their pay arrangements to ensure they remained competitive, both in amount and structure."

The survey found two-thirds of the pay awarded to chief executives of larger companies came from performance-related incentives, against less than a fifth at smaller companies.

The survey also analysed pay awarded to non-executive chairman, which ranged last year from £35,000 to £382,000. The overwhelming majority were paid salary and fees.

The Higgs report last year into the role of non-executives said that chairman might have to be rewarded in more imaginative ways.

The lack of supply of eligible chairmen for the myriad vacancies at FTSE-100 companies makes that a certainty, said Mr Weight.

The 30-page IRS survey also analyses the pay of other executives such as the finance director, highlights differentials between directors, the mix of remuneration, sector differentials, annual bonuses and long-term incentive plans.

The IRS Executive Directors Survey 2004 costs £250.www.irsgroup.co.uk

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