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Cath Everett

Sift Media

Freelance journalist and former editor of HRZone

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News: “Shareholder spring” leads to fewer senior exec pay rises

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Almost half of senior executives in the UK’s largest companies failed to secure a pay rise this year following the “shareholder spring” backlash against excessive renumeration.

According to a report by Deloitte Consulting, some 46% of the chief executives in FTSE 100 firms saw their basic salary frozen this year compared with only 21% in 2011.
 
But although shareholders had spoken out against excessive pay increases, CEOs at a mere two companies – WPP’s Sir Martin Sorrell and Aviva’s Andrew Moss – had their renumeration reports voted down, while only seven were rejected in total.
 
This indicated that the shareholder spring had not taken place across the board and that rebellions had been limited to only a few high profile firms, Deloitte pointed out.
 
As a result, the average CEO pay rise was 2.4% compared with a national average of 2%, taking senior executive salaries to £856,000 compared with a national average of £26,200.
 
As a percentage of salary, however, bonuses were still higher than in any other year apart from 2011, although more were paid in shares instead of cash and were sometimes not paid out for several years – and even then, only if the company’s financial performance hit expectations.
 
To this end, the number of clawback schemes introduced has doubled to 61% now from 36% last year.
 
Stephen Cahill, a Deloitte partner, said that the bonus element was “the part of the package where there is still work to be done. Any pay-out in excess of half the maximum should be the result of better than ‘good’ performance”.
 
But the general restraint exercised by renumeration committees was indicative of both the shareholder spring and on-going difficult economic conditions, which had seen a lot of companies struggling to perform, he added.
 
“We are encouraged by lower salary increases and bonus pay-outs,” Cahill said. “This suggests that renumeration committees are taking steps to ensure that the compensation paid to executives is fair and reasonable and linked to the long-term strategy and success of the business.”

One Response

  1. Assumptions from a partner at Deloitte…..

    As a Compensation professional I am shocked to read that a PARTNER at Deloitte would make the following comment : "Any pay-out in excess of half the maximum should be the result of better than ‘good’ performance".

    This assumes that in all companies a target bonus should be set at half of the maximum opportunity and this is totally wrong because your reward schemes must be adapted to the company specifics – not based on what all the others are doing. The corollary is that all companies would have the same acceleration curve for performance above expectations (because maximum payout is twice the target in this statement).

    Sometimes a company sets very stretching goals and the maximum opportunity is not that much higher because the organisation does not want to accelerate payment for over-performance that much, especially if there is difficulty to assess performance quantitatively (for example in start-up situations).

    Does anyone ever challenge these bigwigs at consulting firms when they make general statements like that ?

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Cath Everett

Freelance journalist and former editor of HRZone

Read more from Cath Everett
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