Executive remuneration in FTSE 100, 250 and SmallCap companies - April 2021 - market update
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Executive remuneration in FTSE 100, 250 and SmallCap companies April 2021 – market update
Overview and key themes
Stephen Cahill, Head of UK Executive
Ahead of the 2021 AGM season, the majority of December year end companies have published their annual report, setting out details of 2020 pay
Compensation Consulting Practice
outcomes and decisions for the coming year. While not a ‘policy year’, around one-third of companies are putting new remuneration policies to a
binding shareholder vote, as remuneration committees take a fresh look at how executive reward aligns with the business strategy going forward.
In the context of COVID-19, investors and proxy agencies have issued a clear expectation that executive pay outcomes should reflect the wider
Stephen Cahill, Vice Chairman
stakeholder experience, in particular where government support has been used and where a company’s workforce has been negatively impacted.
This report summarises pay outcomes and decisions across the FTSE 100, 250 and SmallCap, with some key themes set out below. Head of UK Executive
Compensation Consulting Practice
More challenging 2021 AGM season? Reduced pay out-turns – alignment with wider stakeholder
experience
Early signs are that the 2021 AGM season could be more challenging for
FTSE 100 companies, following two quieter years in 2020 and 2019. Annual bonus outcomes significantly reduced, with increased use of
negative discretion and waiver or cancellation of plans. Very limited
Around 20% of ISS recommendations issued to date have been ‘against’ examples of bonuses paid where the UK Coronavirus Job Retention
FTSE 100 directors’ remuneration reports (DRRs). Scheme (‘furlough’) has been used and not repaid.
Examples of
Alternative new incentive
incentive plan models
structures Majority operating salary freeze for FY21
Examples of more bespoke incentive plans being introduced – Over 55% of companies implementing FY21 salary freeze for
e.g. linked to specific COVID-19 recovery strategy or longer- executive directors. Early indication that salary increases
term time horizons. above the workforce rate will be an area of proxy focus in the
2021 AGM season.
Increase in restricted share plans Continued focusand
Focus on ESG on ESG and climate metrics
climate
15 new restricted share plans across the FTSE 100, 250 and SmallCap. Over 60% of FTSE 350 companies now incorporate ESG metrics under
Mixed reaction from proxy agencies to date, with focus on strategic their annual bonus plan. Increased focus on climate-related metrics
rationale and performance underpins. linked to net zero ambitions and scope 1 and 2 carbon emissions.
Sample information
Analysis contained within this report is based on 56 FTSE 100, 106 FTSE 250 and 51 FTSE SmallCap companies with financial years ending between 1 September and 31 December 2020. 2Based on 56 FTSE 100 September
FTSE 100 – market snapshot to December year ends
Stakeholder context Salary increases (CEO) Performance share plan vesting (% of maximum) Long-term incentive awards
% of sample 25%
(FY20/21)
100%
c.25% Use of furlough 20% 80% Granting normal LTI
Median c.45% c. 95%
value award
Use of furlough – 15% 60% of maximum
c.10%
not repaid
10% c.55% no increase 40% c.20% Delay target setting
c.15% No final dividend
5% 20%
Workforce 3 companies – upward Lower/wider
c.15% 0% 0% discretion/adjustments
c. 25%
redundancies performance ranges
Annual bonus out-turns (CEO % of maximum) c.35% of companies using downward New remuneration policies (15 companies)
discretion/waiver/cancellation.
3 companies – upward discretion/adjustments
100%
Median CEO bonus 39% of
80% maximum Decrease
% of maximum
incentive
60% maximum Restricted share
13% plan
Over one-third paying zero
40% 20%
bonuses New incentive
plan/other
20%
14%
0%
F F F F F F F F = furlough, not repaid Increase incentive
Minimal /
maximum
governance changes
33%
20%
Pension alignment ESG and incentive plans
Approach where not previously committed to reduce incumbent pensions % of FTSE 100 using ESG metrics
Nearly all will be aligned with
30% Annual bonus
Pension % of salary
workforce rate by end of 2022. 60%
20%
LTIP 24%
10%
Increase in use of climate metrics such as Scope 1 and 3
0% 2 emissions reduction.Based on 106 FTSE 250
FTSE 250 – market snapshot September to December year ends
Stakeholder context Salary increases (CEO) Performance share plan vesting (% of maximum) Long-term incentive awards
% of sample 100% (FY20/21)
25%
c.40% Use of furlough 80% Granting normal LTI
20% Median c.25% c. 95%
value award
Use of furlough – 60% of maximum
c.20% 15%
not repaid
10% c.55% no increase 40% c.20% Delay target setting
c.35% No final dividend
5% 20%
Workforce 2 companies – Lower/wider
c.30% downward discretion c. 20%
redundancies 0% performance ranges
0%
Annual bonus out-turns (CEO % of maximum) c.40% of companies using downward New remuneration policies (40 companies)
discretion/waiver/cancellation.
2 companies – upward discretion
New plan (e.g. VCP, Decrease incentive
100%
Median CEO bonus 24% of single incentive maximum
80% maximum plan) 5%
% of maximum
8%
60%
Restricted share
40% c.40% paying zero bonuses
plan
25%
20%
0%
FFF F F F F FF F FFF F F F F F F Minimal / governance
F = furlough, not repaid
changes Increase incentive
40% opportunities
22%
Pension alignment ESG and incentive plans
Approach where not previously committed to reduce incumbent pensions % of FTSE 250 using ESG metrics
30%
Nearly all will be aligned with
Pension % of salary
workforce rate by end of 2022. Annual bonus 57%
20%
LTIP 15%
10%
Increase in use of climate metrics such as Scope 1 and 4
0% 2 emissions reduction.Based on 51 FTSE SmallCap
FTSE SmallCap – market snapshot September to December year ends
Stakeholder context Salary increases (CEO) Performance share plan vesting (% of maximum) Long-term incentive awards
% of sample (FY20/21)
25% 100%
c.75% Use of furlough Granting normal LTI
20% 80% Median 0% of c. 95%
value award
Use of furlough – 60% maximum
c.50% 15%
not repaid
10% c.70% no increase 40% c.35% Delay target setting
c.60% No final dividend
20%
5% 1 company –
Workforce c. 10% Lower/wider
c.35% 0% upward
redundancies 0% discretion
performance ranges
Annual bonus out-turns (CEO % of maximum) c.60% of companies using downward
New remuneration policies (19 companies)
discretion/waiver/cancellation.
100%
Median CEO bonus 0% of
80% maximum
% of maximum
Decrease
60%
incentive
40% c.60% paying zero maximum Restricted share
bonuses 13% plan
20% 20%
0%
F F F F F F F F F F F F F F F F F F F F F F F F F F
F = furlough, not repaid Minimal /
Increase incentive
governance
opportunities
changes
27%
40%
Pension alignment ESG and incentive plans
Approach where not previously committed to reduce incumbent pensions % of FTSE SmallCap using ESG metrics
c.75% committing to align incumbent
Pension % of salary
pensions to workforce rate
20% Annual bonus 28%
10%
LTIP 7%
5
0%Contacts
Mitul Shah
020 7007 2368
mitulshah@deloitte.co.uk
Alison Barton (Insights)
020 7007 4285
alibarton@deloitte.co.uk
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