FTSE 100 chief executives see average bonus rise to £1.12m
The average bonus for a FTSE 100 chief executive rose by 3% to £1.12 million this year, according to a new report that raises questions about how closely boards responsible for setting the awards are judging bosses' performances.
These payouts, together with a 3% rise in base salaries to £891,000, helped total remuneration packages jump by 6.8% to an average of £4.28 million, according to analysis by PwC of pay packages reported at 2015 annual general meetings.
In the wider economy, latest official figures show annual pay growth running at 2.4%.
The level of bonuses, which are supposed to be linked to performance, was 72% of the maximum award available - unchanged since 2012.
PwC executive pay partner Tom Gosling said: "The consistency in bonus payouts is raising questions about how well variable pay is living up to its name.
"To build trust in the system, remuneration committees must continue to improve the quality of disclosure about how bonus targets are set and whether they are sufficiently stretching. This is likely to be where shareholders' focus will shift next."
The report said that the rise in the median total package to £4.28 million was largely influenced by a strong stock market performance up to the early part of 2015.
It added that falling stock markets later in the year are expected to result in a lower single figure of pay for the next reporting year.
The report said that the 3% rise in salaried pay was evidence that remuneration committees were showing "restraint". It added that 36% of top-flight bosses received no salary increase this year, up from a quarter in 2014.
Mr Gosling said: "This continues the trend of largely static executive pay levels in real terms since the financial crisis."
The report said that most firms are introducing tighter controls on executive pay in response to shareholder concerns.
It said that over half of FTSE 100 firms now stipulate there must be five years between the granting and release of long-term incentive payments.
Clawback has been introduced by almost all companies so that bonuses can be reclaimed in the event of wrongdoing, the survey added.
However, the report added that these new brakes on pay can be seen as arbitrary and overly complicated.
Mr Gosling said: "There's been growing dissatisfaction with long-term incentives, which are often seen as a lottery and too complicated.
"In response, companies are looking for performance measures that more closely link to company strategy.
"At the same time they're satisfying shareholder demands by increasing the length of time that shares must be held."
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