FTSE 250 bosses’ total pay falls as shareholder pressure continues over pay packages

The fall came as companies continued to move towards best-practice remuneration structures in the face of ongoing pressure from shareholders over pay and reward programmes.

Institutional Shareholder Services (ISS) issued ‘against’ recommendations in respect of annual remuneration reports at 17 per cent of FTSE 250 firms’ Annual General Meetings (AGMs) during the 2018 shareholder season, slightly higher than last year.

Of the FTSE 250 companies holding their AGMs so far in 2018, 10 per cent have received ‘low votes’ of less than 80 per cent shareholders in favour of the annual remuneration report. Around half of these companies also received low shareholder votes last year.

The drop in chief executives’ pay this year is in contrast with their peers in the FTSE 100, whose total pay increased by 12 per cent in 2017. The median salary increase for FTSE 250 chief executives remained at around 2 per cent, with around a third receiving no salary increase at all.

Bonus pay-outs were up, however, with FTSE 250 bosses taking a median of 75 per cent of their maximum bonus opportunity, compared to 68 per cent last year. The median vesting of performance share plan awards dropped to 48% of maximum this year, compared to 60 per cent last year.

Mitul Shah, reward partner at Deloitte said: “Despite seeing a more stable picture in terms of pay levels and opportunities, the 2018 AGM season has demonstrated that a challenging shareholder environment continues for FTSE 250 companies.

“This year we have seen a particular focus on those companies that have failed to respond to shareholder concerns raised in previous years, showing the importance of companies listening to, and acting on, shareholder feedback”.

In around three-quarters of performance share plans no shares will be released to executives until after five years (51% last year), which is now aligned with FTSE 100 practice. This trend is expected to continue following recent changes to the UK Corporate Governance Code.

In addition, 14 per cent of companies increased their executive shareholding requirements in the last year, and nearly all (93 per cent) of chief executives are now required to hold at least 200 per cent of salary in shares. Eight companies now operate post-termination shareholding requirements for executives (compared to one last year), a feature also highlighted in the new UK Corporate Governance Code.

There have also been signs that shareholders can be supportive of more innovative incentive arrangements, with two FTSE 250 companies receiving the support of their shareholders in adopting restricted share plans.

Mitul Shah, reward partner at Deloitte, concluded: “Investors have shown that they can be more receptive to FTSE 250 companies proposing alternative models of pay this year, where these alternatives are supported by a robust business rationale and tailored in the right way.

“Hopefully we will see this trend grow as well as a more positive dialogue between companies and shareholders regarding how more innovative and diverse structures could be used.”