Rebellion against executive pay kicks in
Salary rises for chief executives of large UK companies are slowing amid signs that the shareholder rebellion against excessive pay packages is influencing decisions on remuneration.
Total pay growth among FTSE 100 chief executives slowed last year to an average of 14 per cent and a median of 8.5 per cent to stand at £3m, according to Incomes Data Services, the research group.
This was much lower than an earlier report on directors’ pay published in October that showed an average rise of 43 per cent to £3.86m for chief executives, IDS said.
If median figures are used – the halfway point between the largest and smallest rise – the October report recorded an increase calculated at a more modest 16 per cent.
Disgruntled shareholders have claimed a number of high-profile victories over pay in recent months, most notably a rebellion against WPP chief executive Sir Martin Sorrell and the resignation of Trinity Mirror chief executive Sly Bailey, but the data from Incomes Data Services reveal a more comprehensive picture of UK executive pay.
However, the research group stressed the comparison between the two reports was not perfect. The matching samples of executives were different and there was a timespan overlap with the latest findings looking at the calendar year of 2011 while the October report looked at the 12 months up to March 2011.
Much of the slowdown in the latest findings can be attributed to smaller bonus payments, which shrank 2 per cent last year to a median of £669,000 for FTSE 100 executives.
Steve Tatton, editor of the IDS report, said: “Remuneration committee members have now realised that their decisions will be scrutinised very closely by shareholders and the media.
“Shareholders are demanding to know what they are paying for. No longer, it appears, do remuneration committees and directors have a free hand, in the words of some, ‘to pay themselves what they wish’.”
However, some shareholders warned it was too early to tell how much rebellions this spring, which forced some chief executives to resign, will influence remuneration.
A senior portfolio manager at a leading UK asset manager said battles over pay will still continue.
IDS said the slowdown in executive earnings growth may be due to both a worsening economy and a combination of government, shareholder and media pressure.
The growth in total earnings can be largely attributed to money earned through long-term incentives and matched bonus shares based on past performance.
Although only a minority of FTSE 100 directors received matched bonus shares, the median value of these went up by 18.1 per cent to £473,302.