Third of FTSE 100 to freeze executive pay

More than a third (38%) of FTSE 100 companies surveyed are planning to freeze salaries for executive directors in 2013, according to research by PricewaterhouseCoopers (PWC).

Its research, which surveyed heads of reward, executive board members, HR directors and remuneration committee chairman in 40 FTSE 100 companies, found that salary increases, where given, are expected to be in the 3% to 4% range, while only 10% are planning increases of more than 4%.

The research also found:

  • 15% of respondents said they expected total executive pay levels to be more than 10% lower in their organisation in three to five years’ time, while 55% felt these would be about the same and a quarter thought they would be up to 25% higher.
  • Fewer than 10% of respondents expected bonus payouts to increase in 2013, while 48% expected bonus payouts to be the same as 2012. A further 21% thought they will be at least 10% lower and 17% predicted they will fall by more than a quarter.

Tom Gosling, head of PwC’s reward practice, said: “The calls from shareholders for pay and bonus restraint appear to have hit home.

“Following a number of years in which bonuses had crept up to around 80% of maximum pay on average, we expect them to fall back towards target levels of around 60% of pay this year. This will mark the second successive year of bonus reductions in the FTSE 100.

“It is clear that companies and remuneration committees are conscious of demonstrating a responsible approach to executive pay this year. We see evidence of companies showing restraint in pay increases, exercising greater rigour in bonus decisions and improving transparency through early adoption of the Department for Business, Innovation and Skills (BIS) disclosure proposals.

“There is no doubt that the intense shareholder, public and political focus on executive pay over the last 18 months has caused a change of approach. But the level of impact is still only modest and anyone hoping for a large-scale reduction in executive pay and bonus payouts in the long-term is likely to be disappointed. We expect executive pay to plateau for a period, rather than fall dramatically.

“In all of the debate around executive pay, perhaps most worrying is the impact on the image of the UK as a place to do business. Nearly two-thirds of companies said the scrutiny on executive pay is making the UK an unattractive location for executives. The UK benefits hugely from the flow of talent to our shores, bringing with it investment, jobs and tax revenues, and care must be taken not to damage our competitive position.”