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Aug 22, 2023

Energy bosses rake in highest pay rises during cost-of-living crisis

BP, Shell and Centrica among top five on FTSE 100 executive pay increases list

CEOs from energy companies BP, Centrica and Shell rank among the top five in the FTSE 100 companies list for receiving the highest pay increases in 2022, according to a report from think tank the High Pay Centre.

The report details how the energy conglomerate bosses received pay rises of more than £3 mn ($3.8 mn) each in 2022 while a war in Ukraine and a cost-of-living crisis swept the globe.

BP chief executive Bernard Looney tops the charts with a pay difference of £5.57 mn, rising from £4.46 mn in 2021 to more than £10 mn in 2022. BP saw profits reach $27.6 bn in 2022, up from $12.8 bn the previous year, reflecting the impact price increases have had on the energy sector.

Energy bosses rake in highest pay rises during cost-of-living crisis
Luke Hildyard, High Pay Centre

Chris O’Shea, CEO at Centrica, saw his earnings increase by 413 percent to £4.49 mn from £880,000, while Shell CEO Ben Van Beurden saw his pay increase to £9.7 mn from £6.34 mn the previous year.

‘At a time when so many households are struggling with living costs, an economic model that prioritizes half-a-million-pound pay rises for executives who are already multi-millionaires is surely going wrong somewhere,’ says Luke Hildyard, director of High Pay Centre.

‘How major employers distribute the wealth their workforce creates has a big impact on people’s living standards. We need to give workers more voice on company boards, strengthen trade union rights and enable low and middle-income earners to get a fairer share in relation to those at the top.’

Pay incentives

According to the report, base salary represents only 21 percent of total FTSE 100 CEO remuneration, on average. Most of the total pay package is made up of incentive pay in the form of bonuses and long-term investment (LTI) plans.

Mean bonus payments in 2022 were slightly lower than in 2021, while the mean LTI was higher and the mean bonus payment decreased slightly from £1.43 mn in 2021 to £1.4 mn in 2022.

In the latest findings from IR Magazine, just under seven in 10 investors consider executive compensation as part of their investment thesis.

Alignment of interests between management and shareholders is the key benefit investors see in linking executive compensation to company performance. The most common challenge cited by investors in linking executive compensation to company performance is that it can lead to short-termism.

Approaching half of IROs have seen increased investor interest in executive compensation over the past five years according to IR Magazine research, while 44 percent of investors say they have spoken more about the issues with companies in this time.

Click to read Sample: Executive Compensation research report