Shareholder spring takes its toll on FTSE executive bonuses

Bonuses for Britain's top bosses have fallen for the second year running.

by Gabriella Griffith
Last Updated: 18 Nov 2013

Signs that FTSE executive bonuses are being reined in following last year’s shareholder spring are palpable: both PwC and Deloitte published their bonus studies this morning, and the news is bad for the UK's top brass.
 
Bonuses for FTSE 350 bosses have dropped for the second year in a row, with one in 10 executives receiving no bonus at all, according to PwC’s report. For the majority of executives total pay hadn’t budged, and for those who did get a rise, it was in line with inflation (an average of 3%).
 
Deloitte, meanwhile, found median bonus payouts for FTSE 100 executives were 67% of the maximum payouts possible. Generally, the maximum bonus is 150% of salary. This is a significant drop from 75% in 2011 and 87% in 2010.

The changes in executive bonuses are thought to be a reaction to last year’s shareholder revolt, during which investors in several FTSE companies mutinied against executives because of their large bonuses.
 
In reaction to the discontent, Vince Cable drafted a new rule stating firms must change their executive pay policy if over half of investors reject it – the new rule kicks in next month.
 
‘It is unsurprising that following a bruising 2012, companies have been keen to avoid the spotlight by demonstrating a responsible approach to executive pay,’ said Tom Gosling, head of PwC’s reward practice.
 
‘Companies had heard "loud and clear" from shareholders that bonuses and pay rises that are not closely linked to performance are unacceptable.’
 
Whether or not this trend will be reversed if the economy - and the fortunes of our biggest companies - continue to rebound will be something to watch out for as bonus season starts again in the spring.
 
 ‘Improved performance should lead to higher bonus payouts, but remuneration committees will be keen to continue showing restraint in what remains a controversial area,’ said Gosling.  
 
‘The key will be for companies to demonstrate a very robust link between pay and performance.’
 
Companies facing an ongoing struggle to attract top global talent may have questions over whether the curb on bonuses will be conducive to increased performance. UK companies are facing tough competition from their global peers in getting the most skilled workers on board. Could putting pay control into the hands of shareholders do more damage than good?

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