In these uncertain times, what’s happening to executive pay levels?

The verdict’s in. Analysis by PwC of the first 40 FTSE 100 companies suggests pay levels are falling in real terms

2016/2017 has been a rollercoaster of a financial year. Brexit, changes to IR35 and the recent triggering of Article 50 has led to a level of economic uncertainty. But what’s been the impact on executives and their pay? Is it time to ask for a rise? Or is it time to sit tight and wait for the tide to turn?

According to PwC, who carried out an analysis of the first 40 FTSE 100 companies to publish their remuneration reports in 2017*, 42.5% of executives received no salary increase this year at all. It’s not just the executives who’ve been hit. CEO’s median total pay figure dropped £4.3m to £4.1m. What’s more, the total pay in the upper quartile fell from £6.6m to £5.7m. This is sure-fire sign that shareholders are looking for prudence in the current climate. And who can blame them? But it certainly makes it tough when companies are striving to retain and keep their top talent engaged.

Head of Reward at PwC Tim Gosling says, "Companies are under the most intense scrutiny ever on pay decisions and it’s no surprise they’re showing restraint."

Restraint indeed. And where CEO salary increases were made, they were in line with other employees – with the median around 2% (which is down from the median salary 2015  figure of 3%)

There is a call for changes to pay design (noticeably from the Investment Association Executive Working Group and the BIS Committee) and whilst almost two thirds of the 40 FTSE 100 companies analysed are looking to reform, they’re not there yet. Conventional long-term incentive plans are common-place and best practice changes are being reviewed and discussed.  We’re certainly not witnessing any radical transformations.

In the meantime, for executives who are looking to advance their salary, they might want to reflect on the state of the market.  It’s a case of the grass is not always greener. Moderation, caution and restraint seem to be the order of the day. For now, at least.

*Based on 40 FTSE 100 companies with year ends on or after 30 September 2016

Thursday, 27 April 2017

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Steve Playford Date: Apr 28, 2017

I think that in these difficult times it is only right to spare a thought for those struggling CEO's who have seen their pay drop from £4.3 million to a paltry £4.1 million a year. ;-)

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In these uncertain times, what’s happening to executive pay levels?