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Aug 21, 2019

FTSE 100 CEO pay drops due to new reporting regime, reveals Deloitte

Median pay was £3.4 mn in last financial year

CEO pay at FTSE 100 companies has dropped to its lowest level since 2014, according to Deloitte’s annual FTSE 100 executive remuneration report.

The analysis of filings from the latest season of AGMs reveals median pay for a FTSE 100 chief executive stands at £3.4 mn ($4.1 mn), down from £4 mn in the same period the year before and the lowest level since 2014, when a reporting requirement to provide a single figure for total pay was introduced.

‘Since the introduction of the 2014 reporting and voting regime, we have seen remuneration levels stabilize and a significant shift in the simplification of pay packages,’ says Stephen Cahill, vice chairman at Deloitte, in a statement. ‘Under the vast majority of long-term incentive plans, executives will now have to wait five years to receive any shares.’

Deloitte finds that almost a third of FTSE 100 CEOs received no increase in base salary, with a median salary increase of about 2 percent. Bonus payouts remained similar to the previous year at a median level of 70 percent of salary, compared with 72 percent in the previous year.

A number of pay revolts have been seen by investors in the recent AGM round, including at Standard Chartered, Playtech, Barclays, De La Rue, Ocado, Standard Life Aberdeen and Hammerson.

But Deloitte notes that the number of FTSE 100 companies receiving ‘low votes’ on pay – measured as below 80 percent in favor – fell by almost half to 7 percent of companies compared with 13 percent last year.

The biggest change, however, has been to long-term incentive plans, with only 5 percent of FTSE 100 companies now operating more than one long-term incentive plan compared with almost half of companies five years ago.

On this, Cahill says: ‘In the coming year we expect to see a further shift in reduced pensions and requirements for executives to hold shares post-leaving. Given current uncertainty in the UK business environment, shareholder pressure and regulatory controls should be balanced with the need to ensure the UK is able to attract the caliber of talent that can deliver continued prosperity for businesses.’

An interesting development Deloitte uncovered is that investors are now increasingly focusing on FTSE 250 businesses, indicating concerns that smaller companies are not embracing the same corporate responsibility measures being instigated by larger companies.

About one in six companies in the FTSE 250 was hit by low votes on its annual remuneration report, says Deloitte – the highest level of shareholder disagreement for five years.

Cahill adds: ‘We are seeing continued evidence that investors expect the same standard of disclosure and engagement on pay across the UK market, with declining levels of shareholder support in the FTSE 250.

‘In particular, we are seeing pressure from investors for improved transparency around bonus plans, as well as an expectation that remuneration committees will apply judgment and discretion where payouts are not considered to reflect the shareholder experience.’


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