FTSE 350 chief executive officers (CEOs) received a 12% increase in their remuneration last year due to the improving financial performance of FTSE 350 companies, according to research by EY.
Its Future horizons report also found that chief financial officers received a 9% rise in their remuneration.
The increases for both groups have been primarily driven by improved pay-outs of long-term incentive plans.
However, salary increases for CEOs are now more closely aligned to the pay awards received by the wider employee population.
This follows the introduction of new directors’ remuneration disclosure rules which came into force in October 2013. As part of the new rules, companies are now required to disclose broad based employee pay increases, alongside executive pay.
According to EY’s analysis, FTSE 350 CEOs received increases of 1, 0.9 and 2.5 percentage points less than other employees for salary, benefits and bonuses when looking at the median respectively.
But the research also found that just a third of companies reviewed their remuneration policies over the last year.
In addition, just 4% introduced new long-term incentive plans, compared to 5% in 2012 and 13% in 2011.
Mark Shelton, head of executive compensation and reward at EY, said: “It’s perhaps no surprise to see the improving economic and business outlook being reflected in the pay awards of FTSE executives. But greater scrutiny from institutional investors and the introduction of new legislation in remuneration disclosures has led to a rethinking of the relationship between executive and employee rewards.
“For many companies, this year was about compliance. But now that the first reporting season under the new regulations has been completed, we expect to see organisations move beyond this governance-focused exercise to undertake a proper review of their reward programmes.
“It is important that organisations ensure that their reward programmes reflect business strategy and are also incentivising to executives and employees.
“We are already seeing the first signs of this happening with shifts toward compliance with governance-led remuneration principles.
“Nearly a fifth of FTSE 100 companies have increased the combined performance and holding period of their long-term incentive rewards in their 2014 policies. And more companies are also requiring their executives to hold share awards for up to five years.”