FTSE 100 companies seek investor support for executive pay packages proposal

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, Deloitte has found.

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.

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 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.

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.

Shah continued: “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.”