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The number of FTSE 100 companies proposing big pay rises or new pay structures for their top bosses has jumped this year, as London-listed groups debate whether to boost incentive packages to compete with US rivals.
More than half of companies that have asked shareholders to approve a new pay policy propose significantly increasing the maximum wages on offer or introducing new incentive structures, according to research by Deloitte.
“We are seeing an increase in major global FTSE 100 companies moving forward with more radical pay proposals this year, both in terms of incentive levels and pay structure,” said Mitul Shah, a Deloitte partner who advises companies on executive pay. .
Proposed pay increases for executives at companies with large international operations such as the London Stock Exchange Group and medical device maker Smith & Nephew have sparked controversy among investors, with some advisers opposing the changes.
AstraZeneca, the second most valuable company by value on the FTSE, got investor approval on Thursday for a pay rise of up to £1.8m for its chief executive Pascal Soriot. But the company suffered a revolt as nearly 36 per cent of shareholders voted against plans to increase its maximum payout for 2024 to £18.7m.
“Many of these companies have a large footprint in the US and cite the disparity in pay levels between the UK and US – as well as the UK’s more stringent pay management standards – as a challenge when competing for and retaining top talent in the global market,” Shah said.
He added that boards would likely risk a higher vote against new pay proposals at annual meetings in order to push through changes that would close the gap with their relevant global counterparts.
In addition to potentially increasing the maximum pay for executives, some companies are turning to US-style “hybrid” incentive packages. They combine performance-related pay with restricted stock plans, under which stock is typically awarded as long as a minimum performance level is met and the executive continues to work.
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So far, 16 companies have proposed new pay policies this annual meeting season, with nine aiming to increase executive pay or reshape how their leaders' pay is calculated, according to Deloitte. Its analysis was based on the first 55 groups to publish their annual reports for fiscal years ending on or after September 15, 2023.
At the same point the previous year, 29 companies proposed a new policy, but only four companies sought major changes, fewer than one in seven.
Average gross pay for chief executives in the first 55 companies to announce rose by 4 per cent to reach £4.5 million in 2023.
Across the UK economy, average earnings including bonuses were 5.6 per cent higher in the three months to January than in the same period the previous year.
