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Annie Hayes

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Pressure on boards to justify fat cat pay

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Accountancy firm, KPMG has revealed that FTSE 100 chief executives were in receipt of an average pay packet of £1.5 million last year; a climb of 8% on the year before and 4% ahead of the average UK-wide increase of the same figure.

According to the report, the findings highlight the yawning pay gap between boardroom executives and employees.

Formal pay evaluations, a new requirement of the Combined Code is likely to help keep the figures in check.

According to the report authors, over half of the FTSE 100 companies evaluated in the report undertook an evaluation last year.

This is a trend which is set to stabilise over time, says the accountancy firm.

KPMG’s Sean O’Hare said:

“We are already seeing a sharper focus on boardroom pay from government, institutional investors and the trade unions. The pressure is definitely on for companies to become more transparent when it comes to paying their top executive and non-executive directors.”

In addition to frequent boardroom evaluations, the report says that the pensions’ lifetime allowance (£1.5 million) will help to control the level of boardroom pay deals.

The make-up of executive pay is also likely to change. The pressure to keep base pay down will lead to a moderate slowdown in base pay and an increased reliance on the ‘variable’ elements of pay deals, according to the report authors.

Sean O’Hare adds: “Remuneration Committees are under significant pressure this autumn to come up with pay plans that satisfy shareholders, government, trade unions as well as their own chief executive and chairman.

“They face increased pressure to keep the pay gap ratio steady and they will also have to contend with issues such as the pensions’ lifetime allowance and the accounting changes that affect share plans. All of these things will impact the boardroom pay debate in the coming year.”

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Annie Hayes

Editor

Read more from Annie Hayes
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