FTSE 100 companies seek investor support for more competitive executive pay packages

• Deloitte analysis shows an increase in FTSE 100 companies seeking shareholder approval for more radical remuneration policy proposals;
• 16 FTSE 100 companies so far are seeking approval for a new binding remuneration policy, with over half looking to significantly increase incentive levels and/or introduce more innovative pay structures;
• The median FTSE 100 CEO package increased by 4% last year – from £4.32m in 2022 to £4.50m in 2023 – based on Deloitte analysis of data from the first 55 companies to publish their 2023 annual reports¹.

Around one-third of the 55 FTSE 100 companies to publish their 2023 annual reports thus far, are seeking shareholder approval for a new binding remuneration policy, based on Deloitte analysis.

Sixteen FTSE 100 companies are seeking approval for a new remuneration policy in the 2024 AGM season to date, with nine of these companies looking to significantly increase incentive levels and/or introduce more innovative pay structures. These include ‘hybrid’ long-term incentive proposals (comprising a mix of performance and restricted share* awards), which are currently most common in the US market, as well as increases to performance-linked long-term incentive pay.

This compares to four FTSE 100 companies that sought shareholder approval for more significant policy changes in the 2023 AGM season.

Mitul Shah, Partner in Deloitte’s Executive Remuneration practice, said:

“We are seeing an increase in large, global FTSE 100 companies moving forward with more radical pay proposals this year, both in terms of incentive levels and the structure of pay.

“Many of these companies have a significant US footprint and cite the disparity in pay levels between the UK and US - as well as more stringent remuneration governance standards in the UK - as a challenge when competing for and retaining senior talent in a global marketplace.

“The coming AGM season will be an interesting test of proxy** and investor appetite for pay practices that move away from current UK market norms. While not all proposals have the support of proxy agencies, many companies will have engaged extensively with their investors. Boards are likely to weather a lower AGM vote on pay proposals that close the gap against relevant global peers.”

2023 pay out-turns

The median FTSE 100 CEO package of those firm’s analysed increased by 4% last year – from £4.32m in 2022 to £4.50m in 2023.

The median CEO annual bonus pay-out was 78% of maximum for 2023 (unchanged from 2022). Around one-quarter of companies used discretion and judgement to reduce bonuses to reflect performance factors such as a health and safety, ESG factors or risk and governance issues.

Median long-term incentive vesting – the extent to which performance conditions are achieved under long term incentive plans – was 65% of maximum (2022: 58% of maximum). Under UK Corporate Governance Code requirements, shares will not generally be released to executives for a further two years.

In light of investor and proxy guidance issued last year, nearly 90% of 2024 salary increases for CEOs have been set at or below the average rate awarded to the workforce, with a median CEO salary increase of 4% to date.

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Notes for editors:

¹ In accordance with UK reporting regulations, total CEO pay packages (‘single figure total remuneration’) reported for 2023 include estimated values of long-term incentive awards. Total CEO pay packages for 2022 (median £4.32m for this sample) are based on the actual values re-stated by companies in 2023.

Deloitte’s “2024 AGM season – FTSE 100 early insights” analysis includes remuneration data in respect of 55 companies with financial years ending on or after 15 September 2023. Prior year data based on comparative values for this sample.

Under UK remuneration reporting regulations for quoted companies, directors' remuneration reports must include a directors' remuneration policy, which is subject to a binding vote at least every three years, and an annual report on remuneration in the financial year being reported on, and on how the current policy will be implemented in the next financial year, which is subject to an annual advisory vote.

*‘Hybrid’ long-term incentive plans refer to a mix of performance-based share awards and restricted share awards. Restricted share awards are typically subject to continued employment only (and in the UK may be subject to an additional ‘satisfactory performance’ underpin).

**Proxy agencies provide shareholder meeting research, analysis and recommendations for institutional investors in respect of voting resolutions.

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