Photo: World Economic Forum
Almost half of the bosses of the UK’s biggest companies failed to secure a rise in their salaries this year during the “shareholder spring” move against excessive boardroom pay.The chief executives of 46% of FTSE 100 companies had their basic salary frozen, according to Deloitte Consulting.
The widespread pay freeze follows sustained pressure from shareholders and politicians. Last year 21% of FTSE 100 chief executives failed to win a pay rise.
However, some industry titans continued to receive rises, which lifted the median FTSE 100 CEO pay by 2.4% to £856,000. The average amount bosses take home is likely to be some multiple of this figure when bonuses and other incentives are added.
A pay survey by corporate governance expert Manifest and pay consultants MM&K recently found average FTSE 100 executive pay rose 12% if the other incentives are included.
Bob Diamond, the former chief executive of Barclays, was named as the highest paid boss in 2011 with £20.9m of “realisable remuneration” under new methodology designed to replicate rules being introduced by the government that require companies to publish a single overall figure for executive pay.
While shareholders have spoken out publicly against excessive pay, only two companies in the FTSE 100 had their remuneration reports voted down this year, while seven remuneration reports have been rejected in total – the most ever. However, Deloitte said the shareholder spring had focused on a few high profile companies and there had not been an across the board shareholder rebellion.
Sir Martin Sorrell, chief executive of advertising giant WPP, suffered the biggest revolt in recent years with 60% of investors voting against a 30% increase in his salary to £1.3m and total remuneration of £13m. In May Andrew Moss stood down as chief executive of insurer Aviva after 54% of investors voted down his pay deal. Moss had waived a 4.8% pay rise that would have pushed his basic salary through £1m. But a shareholder described the £46,000 waived as a “joke” in view of his total package of close to £5m.
Only five FTSE 100 companies – Aviva, WPP, Royal Bank of Scotland, Royal Dutch Shell and GlaxoSmithKline – have had remuneration reports rejected since pay was subjected to a shareholder vote a decade ago.
Stephen Cahill, author of Deloitte’s report, said the restraint shown by remuneration committees was a result of both the shareholder spring and the difficult economic conditions, which have seen many companies struggling to perform.
“We are encouraged by lower salary increases and bonus payouts,” he said. “This suggests that remuneration committees are taking steps to ensure that the compensation paid to executives is fair and reasonable and linked to the long-term strategy and success of the business.”
But he said companies should not be awarding executives any pay rises as a matter of course. “We believe that the starting point for any committee is to consider whether salaries should increase at all, and where increases are awarded they should be limited to those given to other employees, although there are clearly situations where higher increases may be appropriate.” National average pay increases stand at about 2%.
Companies have increased the proportion of bonuses paid in shares rather than cash, sometimes not paid out for several years, and only then if the company’s performance meets expectations. “There is also a greater focus on the retention of shares and a doubling of the number of companies with clawback arrangements in place [61% compared with 36% last year] should the bonus turn out not to have been properly earned.”
Deborah Hargreaves, director of the High Pay Centre, which monitors executive pay, said while basic salaries may not have increased by very much executives continued to collect millions in bonuses.
“The big increases have been in long-term incentive payments and bonuses,” she said. “Business leaders like to say ‘we’re all in this together’ with the workforce, but it’s slightly disingenuous.
“Why don’t they just work for their salaries – like everyone else – rather than trying to hit the jackpot with bonuses? Lots of people have just not had a pay rise for years, which means they’re struggling to make ends meet as inflation is still high.”
This article originally appeared on guardian.co.uk
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