Its review of the 2016 AGM season found that three quarters of FTSE 100 companies received shareholder votes in excess of 90%, in favour of their remuneration reports.  The average vote in favour of a FTSE 100 remuneration report reduced only marginally from 93% to 91% year on year. 　However, there were a minority of examples of significant shareholder dissent, with votes were significantly below 90%, the historic benchmark for high levels of shareholder support. Where shareholders are raising issues they are doing so in greater numbers, the firm says. 　

Some of the key reasons for negative shareholder voting were perceived misalignment between pay and performance, and poor disclosure of the targets on which pay outcomes were based, with shareholders increasingly focused on the quality of disclosure of non-financial targets.

There is an overall picture of relative stability, reflective of the limited change in executive remuneration levels this year compared to 2015. The median salary in FTSE 100 companies increased by just 2.2% and around one third of CEOs saw their salary frozen. Bonus payments were up by 3% but total pay was down 3% on the previous year. 　

Fiona Camenzuli, partner in PwC’s reward and employment team, said: ‘The problem is not that executive pay has changed for the worse over the last year. Pay disclosure of bonus targets has actually improved and more companies have adopted longer term structures to their incentive plans. However, we are seeing growing impatience with the status quo.

‘Executive pay has, for many, become a very visible symbol of inequality, an issue that is given political urgency by the result of the EU referendum.’

The Investment Association has published the final report of its executive remuneration working group, which says calls for companies to be given the flexibility to select the right pay structure that works for them and their shareholders, rather than focusing solely on the currently dominant ‘one-size-fits-all’ long-term incentive plan (LTIP) pay structure.

It is proposing ten recommendations to rebuild trust in executive pay structures in the UK. However, the report stops short of endorsing the idea of having pay votes, put forward by prime minister Theresa May during her leadership campaign. It says one option would be to have binding votes on companies that have failed to receive support from 75% of shareholders on their previous year’s remuneration report.

The group also wants boards to explain why they have chosen their company’s maximum pay level, with consideration of relativities such as the pay ratios between CEOs and different employees, and says there should be greater transparency around the target-setting employed in bonuses, including retrospective disclosure of performance ranges and provision of explanations where discretion has been used.

Another proposal is that whole boards be required to engage in the remuneration-setting process, and for non-executive directors to have at least a year’s experience on a remuneration committee before being appointed as its chair, plus clear disclosure of the rationale to be provided when discretion is used in awarding pay.

Andrew Ninian, director of corporate governance and engagement at the Investment Association, said: ‘The recent intervention from our new prime minister shows that investors and companies need to work together and address the concerns with executive pay, our industry is clear that it expects UK listed companies to work with us to tackle the lack of trust that has resulted from the UK’s complex and ineffectual pay regimes.

‘We will now look to amend our principles of remuneration so the asset managers who look after the financial interests of millions of savers and investors can play their part in delivering the change that is sorely needed.’

Stephen Haddrill, chief executive of the Financial Reporting Council (FRC) welcomed the report, saying that ‘confidence in business generally is being tarnished by the actions of those companies which are doing too little to recognise legitimate shareholder and public concerns on remuneration.’

‘The FRC will consider the recommendation on the need for RemCo chairs to have the skills and experience to undertake the role as part of a wider review of measures we can take to address public concern,’ he said.

The executive remuneration working group final report is here.