75% of FTSE 100 have changed remuneration arrangements

04 September 2014

Three-quarters (75%) of FTSE 100 organisations have made changes to their remuneration arrangements in the past 12 months, according to research by Deloitte.

Many thanks to Employee Benefits for this report:

Deloitte’s annual survey on FTSE 100 directors’ remuneration found that employers are amending their arrangements as they respond to shareholder expectations and the government’s new rules on disclosure and voting.

The research also found that salary increases continue to be modest with a median increase of 2.5%, while fewer organisations (16%) gave directors an increase in excess of 3%, compared to 25% in 2013. More than a third (35%) of chief executive directors and 30% of other executive directors received no salary increase. Median bonus payouts were 70% of maximum bonus opportunity, compared with 75% for 2011 and 87% in 2010. The median level of bonus opportunity is the same as in 2012, at 150% of salary.

The research also found:

· 96% of companies now require executive directors to hold a minimum number of shares, compared with 62% last year.

· 35 FTSE 100 companies have implemented new long-term incentive plans in the past 12 months.

Stephen Cahill, partner in the remuneration team at Deloitte, said: “This year, we have seen an unprecedented amount of change to remuneration structures, undoubtedly prompted by more dialogue between companies and their shareholders following the new requirements on disclosure and voting. A particularly striking finding from this year’s analysis is that, in over a quarter of performance share plans, the participants will not receive any shares for five years. Overall, almost half the long-term plans in place are now based on time periods longer than three years.There is an expectation that directors will hold sufficient shares to create real alignment with shareholders. In the past year, we have seen over a quarter of companies increase the minimum requirements, resulting in a median requirement to hold shares with a value of 200% of salary, compared with 150% last year. In the largest companies this rises to 300% of salary.

“Shareholders are taking a robust position where policies and practices are not considered to be in line with best practice. A key expectation of shareholders is that companies will be able to claw back incentive payments and share awards where they were clearly inappropriate. This is rapidly becoming normal and accepted practice, and provisions allowing sums already paid to be recovered are now in place in over 40% of companies.”