FTSE executives’ pay increases have been outstripped by UK average pay increases for the first time in a decade, according to PricewaterhouseCoopers’ annual report on executive compensation.
In 2009 national average earnings increases stood at 2.5 per cent, exceeding the 1 per cent increase in FTSE 100 executives and the 0 per cent increase for those in FTSE 250 companies. This is the first time executives in the country’s largest companies have come out worse in a decade.
In 2008, increases were 6 per cent for both the FTSE 100 and FTSE 250 while the national earnings pay increase was also higher at 3.7 per cent.
Around one-in-six FTSE 100 executive directors did not receive a bonus in 2009, with median bonus payments falling 20 per cent. Shareholder opposition to remuneration proposals grew – with 20 per cent of FTSE 100 companies having more than one in five of their shareholders withhold support for the remuneration report, up from 3 per cent in 2008.
PwC’s research also found that median maximum bonus potential for CEOs remained stable at 150 per cent of salary in the FTSE 100, equivalent to around £1.2m, and 100 per cent in the FTSE 250, which would equate to around £425,000 if paid out in full. But, actual bonus payments decreased by 20 per cent in 2009 reflecting business performance and the economic climate. The median bonus payout for CEOs in the FTSE 100 and FTSE 250, respectively, were £525,000 and £217,000.
The number of executives receiving nil bonuses doubled in the FTSE 100 last year and increased by 40 per cent in the FTSE 250. In practice, this means one in six executive directors in the FTSE 100 and FTSE 250 did not receive a bonus in 2009. This statistic is significantly influenced by banks, which in many cases did not pay bonuses in 2009.
Tom Gosling, reward partner at PwC says: “Shareholder activism on pay increased significantly last year and with the next AGM season taking place during or in the run up to an election, against a backdrop of continued economic uncertainty, scrutiny on executive pay arrangements will not diminish this year.
“The appropriateness of performance measures and payments in respect of annual bonus and long-term incentive plans will be subject to great debate. “Some new issues will break waves this year – pension arrangements for top executives and contractual arrangements in areas, such as termination terms, will be the focus for many shareholders in the current AGM round.”