In a few high profile cases earlier this year, ‘Shareholder Spring’ revolts at companies such as Barclays, WPP and Aviva showed the investors were at the end of their tether with top dogs awarding themselves more pay for worse performance. In a new report, advisory firm Deloitte found that the median salary increase for directors in FTSE 100 firms was 2.5% in 2012, compared with a 3% increase in 2011. So they’re still inflating their salaries, but just at a slower rate – doesn’t sound like curbing to us.
But, wait a minute. When other metrics, such as bonuses and the overall remuneration packages are concerned, the picture is healthier. Deloitte found in its report that bonuses were smaller on average, and that overall packages were ‘broadly flat’ compared with the year before. So if the balance remains tipped this way, perhaps remuneration will actually shrink next year…? Probably wishful thinking, but given the insane ballooning of pay during the recession years (whilst many companies were doing much worse than anyone would like), any slowing down will be welcome to investors.
Interestingly, Deloitte’s report suggested that the slew of revolts from investors did not constitute a ‘movement’ – it points out specifically that only two blue chip firms actually had their proposed remuneration packages rejected by shareholders. Everywhere else, well, it was just some bluster from a minority of shareholders. It is also worth noting that the Shareholder Spring came on a rising tide of anti-executive sentiment in the British public, and it made good headlines. In most cases, remuneration packages were actually approved by very comfortable majorities of investors.
At MT we can’t see executive pay plummeting next year, or indeed ever. But at least some semblance of a link between performance and pay is starting to emerge in a few corners of the City. If and when the good times return however, prepare to watch those bonuses go into orbit once again…