FTSE 100 CEOs see pay drop to average £3.4m

The average pay package for FTSE 100 CEOs has fallen to £3.4m, down from £4m, but criticism of excessive pension payments is growing as shareholders hit out

While shareholder revolts on remuneration have decreased, there is growing opposition to pension arrangements, according to research by Deloitte.

The number of FTSE 100 companies receiving low votes (below 80% in favour) on pay fell by around a half over this reporting season to 7% of companies compared to 13% last year, according to preliminary findings from Deloitte’s annual FTSE 100 executive remuneration report.

In contrast, the FTSE 250 experienced a more challenging AGM season, with around one-in-six companies (16%) receiving low votes on the annual remuneration report, the highest level of shareholder dissent seen in this market for the last five years.

However, in general, levels of investor support remain high with a median shareholder vote of around 96% across the FTSE 350.

Stephen Cahill, vice chairman at Deloitte, said: ‘It has been a quieter AGM season for the largest companies with fewer shareholder revolts. However, shareholders have shown that they will continue to bite when companies fall foul of their expectations on pay.

‘There continues to be pressure from investors for improved transparency around bonus plans, as well as an expectation that remuneration committees will apply judgment and discretion where pay-outs are not considered to reflect the shareholder experience.’

Only 5% of FTSE 100 companies now operate more than one long-term incentive plan, compared to almost half of companies five years ago.

For 85% of FTSE 100 performance share plans, executives will now receive no shares until at least five years from grant, compared to around half (45%) of plans in 2014. Deloitte predicts this will increase further in the coming year following changes to the UK corporate governance code. The median shareholding requirement for a FTSE 100 CEO is now 300% of salary, although around one half of CEOs hold shares worth more than 500% of salary.

Changes in the governance code requirements  have also seen FTSE 100 companies moving to reduce executive pensions and implement requirements for executives to hold shares post-leaving.

Cahill said: ‘We have seen many companies come forward as “first movers” in response to new regulatory changes with 29 companies reducing pensions for new hires. Without a doubt, executive pensions have been the hottest topic of 2019 and we expect this to continue, with a growing focus on incumbent executives receiving the highest pension rates.

‘In the coming year we expect to see a further shift in reduced pensions and requirements for executives to hold shares post-leaving. Given current uncertainty in the UK business environment, shareholder pressure and regulatory controls should be balanced with the need to ensure that the UK is able to attract the calibre of talent that can deliver continued prosperity for businesses.’

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