FTSE 100 executive pay provokes revolt among investors

BY Fraser Tennant

FTSE 100 executive remuneration is now a major cause for concern, with investors increasingly disapproving of salaries, bonuses and long-term incentives, according to a new report by Deloitte, which is being previewed this week.

Deloitte’s annual ‘FTSE 100 remuneration report’ covers constituents of the FTSE 100 index and provides a detailed analysis of their remuneration policies. The headline findings of the report include the disclosure that eight companies received a vote below 75 percent in favour of their remuneration report, with two failing to secure a majority. Furthermore, just 26 percent of the top 30 companies had their report approved by 95 percent of shareholders or more. This compares to 52 percent last year.

The report also notes that with FTSE companies receiving less than three-quarters of votes in support of their remuneration report so far this year, this is already higher than in the ‘shareholder spring’ of June 2012 - a so-called rebellion by investors over excessive executive pay packages.

“So far this year we have seen a higher proportion of companies receiving less than three quarters of votes in support of their remuneration report,” said Stephen Cahill, a partner in Deloitte’s remuneration team. “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.”

Partially addressing concerns over executive pay, the report does suggest that, due to new disclosure regulations introduced in 2013, the total pay received by chief executives in FTSE 100 companies has been broadly flat year on year, with the median salary increase remaining at around 2 percent. That said, the report does reveal that bonus payments have increased. The median bonus payout as a percentage of the maximum possible is 77 percent, compared with 73 percent in 2015.

“Median bonus payouts have consistently been between 70 percent and 80 percent of the maximum every year for the last ten years,” confirms Mr Cahill. “We believe there needs to be much more rigour in the way the targets for these plans are determined, more discretion used to ensure payouts reflect overall performance, and greater scrutiny by investors once the targets are disclosed.

“When we look back at 2016 it may turn out to be a pivotal moment for executive pay.”

The full Deloitte ‘FTSE remuneration report’ will be published at the end of September 2016.

News: Investor revolts over executive pay 'double since shareholder spring'

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