The salaries of general managers in the FTSE 100 have dropped by almost a tenth this year as companies kept in check executive rewards under shareholder pressure during the pandemic.
An analysis of annual reports by PwC also showed that many more companies now include environmental, social or corporate governance criteria in their payment policies.
Median total remuneration for FTSE 100 executives fell by 9 per cent to £ 2.9 million in the 2021 financial year. Nearly a third of CEOs received no bonus, either because the targets were not met, or the bonus was canceled or waived. That was twice the number who did not get a bonus in 2020.
The cancellation of bonuses meant that overall pay packages dropped last year. Nearly half of CEOs – 45 per cent – have faced a salary freeze since their companies emerged from the worst months of the pandemic – though less than the previous year, when 52 per cent of salaries were frozen.
Managers have warned that the trend towards lower pay could hurt the ability of listed companies to recruit the most talented people, given higher rewards among privately owned companies and those offered by companies in overseas markets such as the US.
Companies backed by private equity also do not face public shareholder battles over compensation, which has become increasingly common as investors try to stop managers from making a profit during a difficult time for most workers.
This year’s AGM season saw a decline in companies that achieved very high shareholder support, according to PwC, and also saw an increase in companies that received low investor support over remuneration packages.
“As we look forward to the 2022 AGM season, we expect to see much of the same restraint and scrutiny where pay outcomes do not properly reflect the broader stakeholder experience or ESG expectations,” said Phillippa O’Connor, Rewards and Employment Leader at PwC UK.
“With more shareholder rebellions recorded than in previous years, companies will do well to consider what actions they can now take to ensure agreement, meet the expectations set and prepare for the new reporting regulations around their net zero. -plans.”
PwC found that the investor advisory group Institutional Shareholder Services and the Investment Association’s trading body were both more critical of pay decisions in the 2021 AGM season.
Last week, the IA wrote to businesses warning them to be vigilant on pay levels, adding that it would want clear explanations if compensation is increased. Companies that received financial support from the UK government had to limit management fees and bonuses this year, it added.
However, investors are also pushing their companies to bring in based on pay targets environment, social and governance criteria along with financial performance.
The PwC analysis indicates that this trend is now well established, with almost 60 per cent of FTSE 100 companies now including ESG measures as part of their executive incentive plans.
Nearly as many link ESG measures to executive payments, an increase of almost one-third compared to last year, while just under half of companies had an ESG measure in their annual bonus. Nearly one-third of FTSE 100 companies have included an ESG benchmark in assessing their 2021 long-term incentive plans.