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The number of FTSE 100 companies proposing significant pay rises or new remuneration structures for their top heads has jumped this year, as London-listed groups debate whether to boost incentive packages to compete with US rivals.
More than half of companies that have asked shareholders to approve a new remuneration policy are proposing to increase significantly the maximum pay on offer or introduce new incentive structures, according to research by Deloitte.
“We are seeing an increase in large, global FTSE 100 companies moving forward with more radical pay proposals this year, both in terms of incentive levels and the structure of pay,” said Mitul Shah, a Deloitte partner who advises companies on executive remuneration.
Proposed pay increases for executives at companies with large international operations such as the London Stock Exchange Group and medical devices manufacturer Smith & Nephew have sparked debate among investors, with some advisers opposing the changes.
AstraZeneca, the second most valuable company on the FTSE, won investors’ approval on Thursday for a pay rise of up to £1.8mn for its chief executive Pascal Soriot. But the company suffered a revolt as almost 36 per cent of shareholders voted against the plans to boost his maximum payout for 2024 to £18.7mn.
“Many of these companies have a significant US footprint and cite the disparity in pay levels between the UK and US — as well as more stringent remuneration governance standards in the UK — as a challenge when competing for and retaining senior talent in a global marketplace,” said Shah.
He added boards were likely to risk a higher vote against new pay proposals at annual meetings in order to push through changes that would close the gap with their relevant global peers.
As well as increasing the maximum potential pay for executives, some companies are turning to US-style “hybrid” incentive packages. These combine performance-related pay and restricted share schemes, under which shares are usually awarded so long as a minimum performance level is met and the executive continues to be employed.
So far 16 companies have proposed a new remuneration policy in the current annual meeting season, with nine of these aiming to raise executive pay or recast how they calculate remuneration for their leaders, according to Deloitte. Its analysis was based on the first 55 groups to publish their annual reports for financial years ending on or after September 15 2023.
At the same stage a year earlier, 29 companies had proposed a new policy but only four had sought to make significant changes, fewer than one in seven.
Median total pay for chief executives at the first 55 companies to report rose 4 per cent to £4.5mn in 2023.
Across the UK economy, average earnings including bonuses were 5.6 per cent higher in the three months to January than in the same period a year earlier.