Roula Khalaf, the Editor of the Financial Times (FT), offers her top story selections in a weekly newsletter termed the Editor’s Digest. This accessible resource provides insights into Khalaf’s curated articles.
A rising number of FTSE 100 companies are aiming to significantly increase executive remuneration and are expediting review periods to stay competitive with U.S.-based businesses. According to a Deloitte report, 24 out of 55 companies that have released their 2024 annual reports are requesting shareholder approval for revised pay policies, compared to 16 at this time the previous year. Of these 24 companies, 13 are seeking substantial increases in incentive levels or proposing “more innovative” pay structures, integrating a combination of performance-based bonuses, restricted share awards, and enhanced long-term incentives. This figure has risen from nine companies last year.
Mitul Shah, a partner in Deloitte’s executive remuneration and reward practice, noted that this trend emerged last year as companies began making their remuneration packages globally competitive, and it has since accelerated. Shah highlighted the heightened competition to attract and retain talent. Ten companies are proposing new pay policies in advance of the triennial shareholder review period, an increase from three firms that took early action the prior year, underscoring the pressure to implement changes.
Historically, the U.S. has granted markedly higher executive pay — encompassing base salary, bonuses, stock awards, and performance-linked incentives — than its UK counterparts. This discrepancy has sparked concerns about the UK’s competitiveness amid heightened reputational risks associated with high executive pay during cost-of-living challenges and political scrutiny. Shah remarked that companies releasing annual reports earlier tend to be the largest global entities. FTSE 100 companies with extensive global operations, U.S. divisions, or aggressive American rivals face significant pressure to align with American remuneration levels.
Previously, shareholder revolts regarding pay have placed constraints on UK boards. Recently, however, investor sentiment appears more open to evaluating pay on an individual basis. Shah explained that this shift does not grant companies a blank cheque; rather, if a company’s rationale is robust, it is likely to receive favorable votes from investors. Encouraged by recent successful outcomes at the London Stock Exchange Group and Smith & Nephew, which garnered shareholder support for multimillion-pound executive pay raises last year, more FTSE 100 companies are now advocating for increased remuneration, according to boardroom advisers.
British American Tobacco and Compass Group, both among the top 15 companies by market value on the London Stock Exchange, are the latest proponents of higher pay packages for their CEOs. Following the UK’s removal of the EU bonus cap, banks such as Barclays, HSBC, and Standard Chartered are seeking shareholder approval for larger payouts to CEOs who meet performance targets. In addition to CEO remuneration, companies are also facing pressure to offer higher pay for management roles beneath the CEO to attract and retain talent.
Data from Deloitte reveals that the median FTSE 100 CEO package rose by 7% for 2024, increasing from £4.49 million in 2023 to £4.79 million.
