FTSE 100 CEO pay for 2022 set to exceed 2021 levels by 12%

• Median FTSE 100 CEO total pay package for 2022 increases by 12%, based on early insights from companies publishing 2022 annual reports;
• Median CEO annual bonus pay-out is at 76% of maximum award for 2022;
• Over 90% of 2023 CEO salary increases were below the average increase awarded to the workforce.

The median FTSE 100 CEO package increased by 12% last year – from £3.72m in 2021 to £4.15m in 2022 – based on Deloitte analysis of data from the first 55 companies to publish their 2022 annual reports.¹

CEO annual bonuses remained high in 2022, with a median pay out of 76% of the maximum award. This was lower than in 2021 when it was 85% of maximum, but slightly above typical pre-pandemic levels.

Median long-term incentive vesting – the extent to which performance conditions are achieved under long term incentive plans – was 58% of maximum, with share award values generally reflecting strong share price performance at the end of 2022 across most sectors. 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 ahead of the 2023 AGM season, over 90% of 2023 salary increases for CEOs have been set below the average rate awarded to the workforce. This includes a median CEO salary increase of 3.5% to date, versus a median average salary increase of 6% for the workforce.

Mitul Shah, Partner in Deloitte’s Executive Remuneration practice, said: “Last year we saw a quieter AGM season as pay levels bounced back, following a period of temporary pay cuts and restraint during the COVID-19 pandemic. Investors were generally supportive in voting on remuneration reports – despite record high bonus payouts.

“We are expecting a more challenging 2023 AGM season as investors closely scrutinise pay out-turns, with a particular focus on potential windfall gains made by executives on the back of incentive awards granted in 2020 during a dip in the market.”

ESG in incentive plans

Over 90% of FTSE 100 companies now incorporate ESG measures into their incentive plans. Long-term environmental metrics are increasingly prevalent, with over 40% of FTSE 100 companies including environmental metrics in the long-term incentive plan. While climate-related metrics are typically focussed on Scope 1 and 2 emissions reductions, five companies in the FTSE 100 have moved to link long-term incentives to Scope 3 emissions reduction, as they look to tackle their most material carbon impacts.

This is likely to increase with the introduction of International Sustainability Standard Board (ISSB) reporting standards, which will include mandatory disclosure of material Scope 3 emissions.
 

Remuneration policies

In the coming 2023 AGM season, around half (53%) of companies are seeking a triennial binding vote on their remuneration policy. Where companies are putting a new policy to vote, c.40% are seeking approval from shareholders to increase maximum incentive levels under performance-based incentives, for example annual bonus or long-term incentive plans. In the majority of cases, these companies have argued that increases will enable them to compete globally for talent.

Shah concluded: “UK-listed multinational companies competing for both talent and business in the US are increasingly citing the disparity in pay levels between the UK and US, as well as more stringent remuneration governance standards in the UK, as a challenge. This is being raised as a contributing factor in the ongoing debate around the long-term competitiveness and success of London’s capital markets.”

ENDS

Notes to editors

¹ In accordance with UK reporting regulations, total CEO pay packages reported for 2022 include estimated values of long-term incentive awards. Total CEO pay packages for 2021 (median £3.72m for this sample) are based on the actual values re-stated by companies in 2022.

Deloitte’s “2023 AGM season – FTSE 100 early insights” analysis includes remuneration data in respect of 55 companies with financial years ending on or after 15 September 2022. 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.
 

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