Remuneration in Danish Large-Cap companies

Benchmarking executive management and board remuneration from 2016 to 2020

Deloitte’s executive remuneration benchmark report for 2020 has landed; an overview of the executive and board remuneration practices for companies listed within the Danish Large-Cap Index.

2020 was a strange year for all and in many respects. The world has certainly changed. The global pandemic impacted companies across all industries and sectors in very different ways. Remuneration practices were no exception. In 2020, we saw the pandemic alter executive remuneration practices to a significant degree. However, this was, largely, to a lesser extent than might have initially been expected at the onset of the crisis in March of 2020, when uncertainty regarding the pandemic was at its highest level, and many companies struggled to navigate the impacts of the pandemic’s first wave.

As such, we have seen scrutiny of company remuneration practices reach an all-time high in 2020, with shareholders, proxy advisors, the media, and other external and internal stakeholders all weighing in. We also saw an increased focus on employee pay. This included how remuneration of the wider employee base had been impacted by the pandemic, and if those impacts were disproportionate in nature when compared to that of executive management – ensuring, at many organisations, that employees were not bearing the brunt of the burden in cases where organisations were facing financial hardships.

This annual report does the important work of providing a benchmark of remuneration data in a year unlike any other in recent memory. We will look at the impacts of COVID-19 on executive remuneration, and provide an overview of the executive and board remuneration practices for the 40 Danish Large-Cap companies. Based on our analysis of remuneration reports, we found that 53% of the Danish Large-Cap companies had their businesses adversely affected to a significant degree by the pandemic in 2020. 25% of all Danish Large-Cap companies’ saw executive remuneration impacted due to the pandemic altering the ability to reach key performance indicators (KPIs) and 10% of all Danish Large-Cap companies saw that their Boards or Management teams applied discretionary negative COVID-19 impacts on executive remuneration. In contrast and on a more positive note, 75% of all Danish Large-Cap companies were not so significantly impacted by the pandemic that their executive remuneration was negatively affected in 2020.

All Danish Large-Cap Companies published a separate remuneration report as required by the Danish Companies Act for all listed companies for the first time for 2020. Our report provides an updated overview of the regulatory and reporting requirements of the Shareholder Rights Directive (SRDII) in Denmark. We describe these requirements and updated guidelines, and provide our benchmarking survey insights on Danish remuneration disclosure practices for 2020. While there are a wide range of practices, and variation in the quality of remuneration disclosures, we note that Danish Large-Cap companies, overall, have increased the level of disclosure in their remuneration reports. Additionally, all remuneration reports were adopted at the annual general meetings (AGMs). However, there is still room for improvement – 33% of the Danish Large-Cap companies can still further enhance their ‘pay for performance’ disclosures. 80% disclosed ‘granted pay’ for their long-term incentive (LTI) plan in ‘the single figure table’ and 73% of remuneration reports received an assurance report from the independent auditor.

Remuneration committees will have their work cut out for them in 2021 in their annual cycles reviewing existing remuneration practices against market practices, preparing scenarios for grants of variable executive pay, setting ESG metrics and targets in executive remuneration, and developing responses to shareholder feedback.

Deloitte continues to advise our clients as they build more resilient organisations – organisations that are better positioned to overcome new disruptions, and help usher in a ‘better normal’ as the world emerges on the other end of the pandemic.

Selected key findings - June 2021

Deloitte’s annual executive remuneration benchmark report for 2020 shows that – while transparency has improved compared to 2019 - there will be a continued need to focus on shareholder aligned incentive pay for executives based on ‘pay for performance’, including setting ESG metrics and targets in executive remuneration.

1. Variable vs fixed

  • Variable remuneration as a share of total pay was unchanged compared to last year
  • Variable pay: 36%
  • Fixed pay: 64%

2. Base salaries

  • Median annual base salary changes
  • CEOs: -1.5%
  • CFOs: 3.0%

3. Annual bonus

  • Median bonus as percentage of base salary for all executive directors
  •  2020: 50%
  •  2019: 42%

4. Long-term incentives

  • Median LTI allocation as percentage of base salary for all executive directors
  • 2020: 39%
  • 2019: 38%
  • Performance and restricted share units remain popular forms of long-term share-based payment, and the use of options decreased significantly compared to 2019

5. Board pay

  • Average board member pay, including committee fees, was unchanged at DKK 0.7m
  • Median total pay for chairpersons increased to DKK 1.50m
  • Median total board pay was DKK 0.2m higher in 2020 compared to 2019

6. Board diversity

  • Percentage of female board members in Danish Large-Cap increased to 33% (2019: 30%)
  • There was two female chairperson in Danish Large-Cap companies in 2020 compared to one in 2019
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