FTSE 100 companies showing 'restraint' with CEO pay

Two in five top bosses received a salary freeze this year, but does this tell the whole story?

by Rebecca Smith
Last Updated: 18 Apr 2016

You may not think it considering the furore we seem to witness about executive pay on a weekly basis, but apparently the nation’s biggest businesses are being restrained with the salaries of their top dogs.

New research from PwC focusing on pay reports from 47 FTSE 100 firms for 2016, claims the data shows 'continued restraint in salary increases for CEOs and CFOs'. They received a median salary increase of 2% (the same as the year before). When stripping out the 42% of CEOs who had their salaries frozen, the median base salary stands at £941,000, a 3% increase.

Fiona Camenzuli, reward and employment partner at PwC, claimed that although salary freezes aren't in the majority, it's still a higher proportion compared to the longer-term trend. ‘Remuneration committees are continuing to make tougher judgements on pay outcomes and coupled with greater scrutiny of performance targets, requirements to hold shares for longer and malus and clawback provisions, mean executive pay is now harder to earn than in the past,’ she said.

So perhaps Britain's bosses were being unfairly targeted? Not everyone is picking up a Martin Sorrell-style pay package for the year. Not so fast, says the High Pay Centre, which is doing its own ongoing research into executive pay, the latest of which focuses on the 'single figure' pay disclosure of 62 companies for the 2015 financial year.

The figure includes salary, bonus, long-term incentives and pensions. And it claims that FTSE 100 firms which have reported pay deals this year have given their CEOs an aggregate 6% rise with the average package at £5.6m. Stefan Stern, director of the High Pay Centre (and an MT contributing editor), thinks the evidence ‘is that the 20-year rising trend in top company pay continues unabated’. While measures of executive pay will always differ, what's clear is that controversy over the issue isn't going away.

While shareholders have had a binding vote on directors’ pay since 2013, most have been slow to rock the boat – and why would they if the business is faring well enough? But it is becoming an ever more contentious topic. Most recently, BP CEO Bob Dudley’s 20% pay increase has come under fierce criticism from shareholders, who will take a vote tomorrow.

Despite the oil company saying its pay structure was straightforward, top 15 shareholder Aberdeen Asset Management has encouraged BP to take heed of the investor revolt. ‘Remuneration rewards as currently set out seem overly complex and need to be simplified,’ it said. ‘We’re sure the company will take note of shareholder feedback and revise its remuneration policy ahead of next year’s AGM.’

If poor company performance keeps getting rewarded by sky-high pay, you'd imagine they won't be the only shareholders getting tetchier. But it's unlikely to turn the tide on executive pay anytime soon.

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