Top Exec pay increases fall but major structural change not on agenda, says report

A study produced by PwC indicated that a mix of shareholder activism and political pressure was dampening leadership renumeration levels at the FTSE 100.

Although executive pay at FTSE 100 companies is falling for the first time in years, there appears to be little appetite for major structural change to renumeration policies, a study has revealed.

The analysis of the first 40 blue chip firms to publish their renumeration reports, which was produced by management consultancy PwC, found that a combination of shareholder activism and political pressure saw median total pay – which includes bonuses – for chief executives (CEOs) fall by 4.7% to £4.1 million this year.

The highest-paid quartile saw total pay drop by more like 13% to £5.7 million, and 42.5% of bosses received no salary increase this year at all. For those that did receive one, the increase was in line with that of other employees.

Tom Gosling, head of reward at PwC, said: “Companies are under the most intense scrutiny ever on pay decisions, and it’s no surprise they are generally showing restraint. This reflects continued shareholder pressure on companies perceived to be outliers on pay.”

Major investors have also raised concerns. Legal & General, one of the UK’s largest asset managers, has taken the lead in a campaign calling for pay restraint. Its latest corporate governance report indicated it had opposed 118 pay resolutions in the country during 2016.

Prime Minister Theresa May has also been ratcheting up the pressure, with the government’s business committee calling for significant change to leaders’ pay policies.

But there appears to be little appetite for major structural change to renumeration policies. Although 63% of the organisations questioned planned to introduce new policies, it seems that controversial long-term incentive plans will remain the bedrock of executive reward schemes.

Gosling said: “Despite growing calls for reform, the continued divergence in shareholder views have made it too risky for FTSE 100 companies to contemplate radical change in pay design this year.”