Financial News

  • 16 October 2012, 18:03

Executive Pay And Bonuses Being Curbed

More of Britain's big companies are reining in executive pay, according to an annual survey of directors' salaries.

The Deloitte executive remuneration report reveals that the median salary increases for executive directors in FTSE 250 companies has remained at 3% - the same level as last year.

The business advisory firm's analysis found that although about 30% of companies gave no increase, a further 46% of firms approved increases of less than 5%.

The capping of salary increases in the companies, which range in market capitalisation from 300m to 3bn, has grown 41% from last year.

The report also found that salary increases, especially in finance and property, were lower than in 2011.

Bonus pay has also come under pressure - with more than half the long-term plans in retail and service companies not paying bonuses in the last two years.

Deloitte remuneration team partner Mitul Shah, said: "While attention is focused on the UK's largest and best-known companies, our report on directors' remuneration in FTSE 250 companies highlights some important differences.

"Directors' remuneration is generally debated in response to the potentially high levels of remuneration in the UK's very biggest companies. We should remember that this only applies to a relatively small number of companies.

"Our research shows that remuneration in the mid-250 companies is lower, structures tend to be less complex and practices are more diverse than in larger companies."

Deloitte's research also showed that linkage in the companies between pay and performance is improving with nearly three-quarters of the companies - 70% compared with 52% five years ago - now having formal shareholding requirements in place.

Forty percent of companies have provisions in place to claw back incentive awards where these have been made inappropriately for any reason - up from 25% last year.

Some 57% of finance and property companies did not give salary increases in 2012 compared with 24% of industrial and manufacturing companies, and 19% of retail and service companies.

Mr Shah said: "This suggests that the significant challenges faced in the finance and property sector recently have been reflected in the debates held by remuneration committees when considering if salary levels should be increased.

"While increases reflect the circumstances of the companies, and there will clearly be specific situations where increases are appropriate, we believe that all remuneration committees, in whatever situation, should consider whether there is a compelling reason to increase salaries for executive directors at all."