FTSE 100 exec pay packets under challenge

Shareholder pressure to curb pay for top executives is mounting and 22% of the UK’s top 30 firms received less than 80% support for their remuneration reports this year, up from just 6% last year, according to Deloitte

The increase in dissatisfaction amongst shareholders follows proxy agencies issuing eight recommendations to vote against or abstain from voting on top 30 firms’ remuneration reports in 2018 – four times as many as were issued in 2017. Deloitte says this is despite median CEO pay levels falling slightly and average share prices rising in the top 30 firms.

This year, in the FTSE 100 as a whole, 14% of companies received less than 80% approval, versus 8% in 2017.

There were 14 recommendations from proxy agencies to vote against or abstain remuneration resolutions in the full FTSE 100, compared to 10 in 2017, and 11 of these received less than 80% approval, illustrating their influence.

Of those firms receiving lower votes on remuneration, four were ‘repeat offenders’ – firms who also received low votes last year.

Stephen Cahill, vice-chairman at Deloitte, said: ‘We have seen a much more challenging voting season, in particular for FTSE 30 companies, despite it not being a policy year for the majority. This reflects a tougher stance taken from proxy agencies in respect of the largest companies, as well as continued pressure on repeat offenders.

‘Shareholders and proxy agencies are increasingly hardening their line not just on pay levels, but where companies are failing to act on previous concerns, in particular around transparency of pay arrangements.’

Deloitte’s analysis found pay fell slightly for CEOs in the FTSE Top 30 in 2017, while there was around a 10% increase across the whole FTSE 100. The median single figure package for a FTSE 100 CEO was around £4m in 2017, up from £3.6m in 2016 but down from £4.3m in 2015. More than a third of FTSE 100 CEOs received no increase in base salary in 2017.

Bonus pay-outs in respect of 2017 performance remained constant, with a median of 72% of maximum compared with 77% two years ago.

Cahill said: ‘The increase in pay for executives of FTSE 100 firms reflects higher levels of performance based vesting under long-term incentive plans this year, and strong market growth in the FTSE 100.’

The government has recently increased the pressure on companies to ensure that their success is reflected in pay ratios right across the company, and Cahill reported some positive moves from remuneration committees, in particular in the improved alignment of executive and workforce pension arrangements.

Cahill said: ‘There is a growing expectation that remuneration committees have the power to reduce pay outcomes where they are excessive or unexpected, as reinforced by recent changes to the UK corporate governance code. Going forward, we expect to see investors and regulators place increased focus on how these powers are used.’

Report by Pat Sweet

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