PwC reveals 2013 pay frozen for a fifth of top chief executives
Bonuses for FTSE 350 executives fell in 2013 for the second year running, according to PwC’s annual executive pay survey of large UK firms.
The research, with 204 companies in the FTSE 350, revealed that one in 10 executives collected no bonus at all in 2013, while one in five chief executives in the FTSE 100 and 15 per cent in the FTSE 250 faced pay freezes in 2013.
The results suggest that the value of bonus reductions have not necessarily been replaced in another area of reward because total pay (made up of salary, bonus, long-term incentives and pension) has remained largely static across senior management roles. And where salary increases were awarded, they were broadly in line with inflation at an average of 3 per cent, which is consistent with 2012 levels.
Tom Gosling, head of PwC’s reward practice, said: “It is unsurprising that following a bruising 2012, companies have been keen to avoid the spotlight by demonstrating a responsible approach to executive pay this year. Restraint is the name of the game, with relatively few changes to pay plans this year. Where there has been change, it has been managed carefully through increased engagement with shareholders and more intensive work in the run up to the AGMs.
“This pattern of active engagement and consultation with shareholders is only set to continue as the Department of Business, Innovation and Skills’ new reporting guidelines come into force this year.”
Of the bonuses that were awarded to FTSE 100 bosses, the median payout was £905,000 representing a 7 per cent drop from 2012 when it was £975,000. PwC said the findings indicate that chief executives received on average just over two thirds of maximum payout in 2013, which is a drop from the high payout levels in 2011 when bonus payouts were typically over three quarters of the maximum award.
Bonuses for senior managers below board level in the FTSE 100 witnessed the biggest drop across the FTSE 350 where payouts as a percentage of the maximum bonus decreased from 70 per cent in 2012 to 62 per cent in 2013.
“Companies have heard loud and clear from shareholders that bonuses and pay rises that are not closely linked to performance are unacceptable,” Gosling added. “The fact executives are receiving a lower proportion of their maximum bonus entitlement confirms remuneration committees are getting tougher in setting and measuring bonus targets.”
He said that the short-term future for executive pay was unclear but if early signs of economic recovery translate into improved company performance, remuneration committees will be faced with a conundrum. “Improved performance should lead to higher bonus pay-outs, but remuneration committees will be keen to continue showing restraint in what remains a controversial area. The key will be for companies to demonstrate a very robust link between pay and performance.”