FTSE 250 companies faced less shareholder opposition to executive remuneration plans than their counterparts in FTSE 100 companies in 2016, according to research from Deloitte. Remuneration arrangements received support from the vast majority of shareholders in 80% of top 250 companies, compared with only 75% in FTSE100 firms.
Salary increases for executives in FTSE250 firms have been held at around 2% and companies are strengthening the link between executives and long-term company performance, ‘due to pressure from shareholders’, Deloitte says.
For example, the median shareholding requirement for executives in FTSE250 companies has increased this year to 150% of salary from 100% in 2015, and from 175% to 200% for chief executives. However, the median bonus opportunity for FTSE 250 companies has increased to 125% of salary for executive directors and, over time, variable incentive opportunities for this group at smaller FTSE 250 companies have moved towards the median for the index as a whole.
Higher performance-based pay is a cause for concern, according to Mitul Shah, Partner in Deloitte’s executive remuneration team:
‘We continue to see bonuses paying out above target year after year. This suggests that target setting decisions may benefit from greater consideration, understanding and rigour. We agree with the Executive Remuneration Working Group and the Investment Association that remuneration committees should be regularly exercising discretion to ensure pay outcomes are a fair reflection of long-term business performance.’