Permanent Staff - News
CEOs have their wings clipped
Britains bosses have had their golden wings clipped, at least if this recent article in the Independent Newspaper about the Deloitte study into FTSE bosses - is anything to go by.
Following the recent AGM season, the consulting firm took a look at the figures reported for the year to the end of February and found that the median average (most common) FTSE 100 CEO's package fell by 13 per cent.
Almost a third of Britain’s top bosses received no increase in base salary at all, with the median rise coming in at 2 per cent. That’s important to note because while an executive’s basic tends to be relatively small compared to the total, all the various bonus and pension schemes they participate in are based upon it.
When it comes to those bonuses, the report found the median payment came in at 70 per cent of base salary, down a shade from the previous year’s 72 per cent. It also noted that executives are having to hold their free shares for longer and that the number of companies offering multiple share based long term incentives schemes is falling.
So all good news. The system works, shareholders are doing their job in keeping executives honest, yada yada?
That’s what the City and Britain’s biggest businesses would like you to think but it really doesn’t stand up to close scrutiny.
It bears repeating that the average package still rolled in at £3.4m, which remains a huge multiple of what most firms’ employees are paid. The numbers produced by Deloitte are also just for a single year and they can vary greatly from year to year. Bonus payments are, for example, often affected by the performance of the stock market or a company’s shares over time. They can vary wildly.
Firms have been forced to address the issue of executives’ enormous pension contributions of late, which is welcome, but it remains to be seen whether what the report found amounts to anything more than a pause for breath.
It’s worth noting that examples of pay scandals continue to abound. Standard Chartered, which endured a revolt over the contributions made to CEO Bill Winters pension, gambling software outfit Playtech, Barclays, currency printer De La Rue, Standard Life Aberdeen, Ocado and Royal Mail have all caused a fuss in recent times and the fallout from the £100m plus handed to house builder Persimmon’s now departed CEO Jeff Fairburn continues to be felt. The bonus scheme that delivered that payment was on the books for years, but shareholders only belatedly woke up to it.
Despite all those examples, Deloitte found the number “low votes” on company resolutions (defined as attracting the support of less than 80 per cent of investors) actually fell. It did report an increase in low votes in the second tier FTSE 250, whose members are smaller and get less attention. That’s welcome, but it remains to be seen how much good it will do.
The willingness of big institutions to act in their own best interests by doing more than wagging the occasional finger remains limited. Defeats are vanishingly rare. Public outrage, media attention and (limited) political action have done more to rein in excess than the City’s institutional investors have. Bar a few worthy exceptions, they continue to behave like absentee landlords.
“Given current uncertainty in the UK business environment, shareholder pressure and regulatory controls should be balanced with the need to ensure that the UK is able to attract the calibre of talent that can deliver continued prosperity for businesses,” Deloitte’s Stephen Cahill said on the back of the research.
His firm’s figures show UK CEOs are doing pretty well all things considered.