More than three quarters of Britain’s leading businesses rethought their pay policies last year amid pressure from shareholders and after the government’s introduction of a binding vote on remuneration.
Deloitte has found that 78 of the companies in the FTSE 100 made changes to their salary, bonus or long-term incentive deals for top directors.
In findings that underscore shareholders’ new-found muscle, the consultancy’s annual analysis of pay has found that more than a third, or 35 per cent, of FTSE 100 companies have introduced reworked long-term incentive plans for executives during the past 12 months.
That is more than at any time during the past decade, Deloitte says in the report, which is due to be published today, noting that a year ago almost half of Britain’s blue chips operated more than one LTIP scheme, but now fewer than 30 per cent do.
Deloitte also has found that a third of companies held the salary of the chief executive flat last year, while a quarter lifted their minimum shareholding requirement for directors.
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It notes that in more than a quarter of performance-related share schemes in the FTSE 100, qualifying directors will not get their hands on any shares for five years.
Stephen Cahill, a partner in Deloitte’s remuneration team, said that the level of change to executive remuneration across the index was unprecendented. “It’s the highest we’ve ever seen,” he said. “A lot of the changes were shareholder-friendly, like higher shareholding requirements for directors and longer holding periods.”
In a typical year, about a third of companies in the FTSE 100 index are likely to tinker with their pay arrangements, he said, adding that, in his view, a leading factor in this year’s busy activity was the introduction of a binding vote on pay.
In the wake of legislation driven through by Vince Cable, the business secretary, shareholders now have two votes on remuneration at company annual meetings. The first, on the previous year’s pay report, is advisory only, but the vote on a forward-looking pay policy covering the next three years is binding.
Mr Cahill said that activity over the coming year was likely to be more muted, although he thought that shareholders would keep up the pressure for companies to more transparent about targets for bonus payouts. Among companies to rethink their remuneration arrangements last year were TUI Travel, the holiday operator, HSBC and Standard Chartered.
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In its report, Deloitte says that salary increases for executive directors have been “modest”, with an average rise of 2.5 per cent across the board. Only 16 per cent of the FTSE 100’s constituents awarded increases of more than 3 per cent, compared with 25 per cent that chose to give directors inflation-busting pay rises the previous year.
It also has ranked average pay for executive directors according to their company’s market value. A senior figure at a business worth between £2 billion and £4 billion will collect an average annual salary of £589,300, Deloitte says. Bosses at businesses with a market capitalisation of more than £36 billion will enjoy annual base pay of just over £1 million a year.