Directors’ bonuses still rising despite opposition from shareholders

board meeting
By Ellen Arnison, ICAS

5 September 2016

The number of FTSE 100 companies receiving less than three-quarters of votes backing their remuneration report is already higher than the ‘shareholder spring’ of 2012, according to Deloitte’s annual FTSE 100 report.

Only a quarter of the top 30 companies had their remuneration report approved by at least 95% of shareholders compared with 52% last year.

Stephen Cahill, partner in Deloitte’s remuneration team, said: “So far this year we have seen a higher proportion of companies receiving less than 75% of votes in support of their remuneration report.

“While we’re still talking about a relatively small number of companies this is rightly a cause for concern. The 2016 AGM season has been bruising for a number of companies, perhaps even more so than the shareholder spring of 2012.”

Concerns raised by shareholders include a lack of transparency about what link exists between executive pay and the business’ performance. Investors expressed worries over pay increases where there was no clear justification.

Executives' pay must be in context

New disclosure regulations established during 2013 appear to be playing a part in putting the brakes on board pay – the median salary increase is still around 2% and the annual bonus potential of 150% of salary has not increased.

The Deloitte report also shows that remuneration structures are becoming less complex and more focused on longer-term plans.

The report also suggests that remuneration committees need to ensure that executive pay is considered in the context of the rest of the company and should be seen to be fair and equitable with policies for other employees.

Stephen Cahill added: “We agree with the concept of the employee’s voice being heard by the remuneration committee. Having to explain differences in policies and payments to a group of employee representatives would bring another dimension to remuneration committee discussions.

“Greater sharing of success may also be a helpful way to deal with the issue of inequality and we hope the government will look at this and consider ways in which companies can be encouraged to share a proportion of their profits with their employees.”


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