Executive pay packages in the FTSE 100 are coming under increasing criticism from shareholders according to preliminary findings of a survey by Deloitte, which found the proportion of companies receiving less than 75% of votes in support of their remuneration has almost doubled since the ‘shareholder spring’ of 2012
The firm’s annual FTSE 100 remuneration report shows just 26% of the top 30 companies had their remuneration report approved by 95% of shareholders or more, half the proportion recorded last year (52%).
In addition, eight companies have received a vote below 75% in favour of their report, with two failing to secure a majority.
At the same time, Deloitte’s analysis indicates that the total pay received by chief executives in FTSE 100 companies has been broadly flat year on year.
Stephen Cahill, partner in Deloitte’s remuneration team, said: ‘So far this year we have seen a higher proportion of companies receiving less than 75% of votes in support of their remuneration report.
‘While we’re still talking about a relatively small number of companies this is rightly a cause for concern. The 2016 AGM season has been bruising for a number of companies, perhaps even more so than the shareholder spring of 2012.’
Concerns raised by shareholders include the lack of bonus target disclosure as well as a lack of transparency about the link between executive pay and the performance of the business.
Moreover, investors raised concerns over increases to pay packages, particularly where there was no clear justification provided, Deloitte said.
The analysis shows the median salary increase remains at around 2%, as it has since 2012. The median annual bonus potential of 150% of salary has not increased since 2007 and the median potential long term incentive plan (LTIP) award has also remained steady for the past few years.
However, actual bonus payouts in respect of performance in 2015 are higher than in the previous year. The median bonus payout as a percentage of the maximum possible is 77%, compared with 73% last year. Only four companies paid no bonus to executive directors while seven companies paid the maximum amount possible.
The report also suggests that remuneration structures are becoming simpler. Ten years ago more than half of FTSE 100 companies operated more than one long term plan whereas today this has decreased to one in five companies.
Stephen Cahill said: ‘Remuneration committees are taking some very positive steps in the right direction but the downside is that remuneration structures are becoming more and more standardised. It seems unlikely that the same structure can support the diverse nature of our top 100 companies.’
