28 Jan 2013 10:01am

FTSE bonuses to be frozen in 2013

FTSE 100 executives will see no increase in their annual bonuses this year, according to a remuneration survey from PwC

Some bonuses are also set to be cut by up to a quarter, in the second successive year of bonus reductions among Britain’s biggest listed companies.

Fewer than 10% of the companies surveyed are expecting material increases to bonus pay-outs, with remuneration committees planning to exercise restraint. Nearly half of respondents expect bonus pay-outs will be about the same as last year, 21% think they will be at least 10% lower and 17% predicted they will fall by more than a quarter.

Pay is also set to be largely static among executives, with over a third saying they were planning to freeze salaries for executive directors in 2013.

Anyone hoping for a large-scale reduction in executive pay is likely to be disappointed

Where salary increases were planned they were expected to be in the region of 3-4%.

Among those surveyed, only 10% are planning increases of more than 4%.

Tom Gosling, head of PwC’s reward practice, said, “The calls from shareholders for pay and bonus restraint appear to have hit home. Following a number of years in which bonuses had crept up to around 80% of maximum pay on average; we expect them to fall back towards target levels of around 60% of pay this year. This will mark the second successive year of bonus reductions in the FTSE100.

“It is clear that companies and remuneration committees are conscious of demonstrating a responsible approach to executive pay this year. We see evidence of companies showing restraint in pay increases, exercising greater rigour in bonus decisions and improving transparency through early adoption of BIS disclosure proposals.”

The drop in executive pay is likely to be a short-term trend however, with only 15% of respondents expecting total executive pay levels to be more than 10% lower in their organization in three to five years’ time. A quarter were expecting it to have increased by up to 25%.

Gosling added, “There is no doubt that the intense shareholder, public and political focus on executive pay over the last 18 months has caused a change of approach. But the level of impact is still only modest and anyone hoping for a large-scale reduction in executive pay and bonus payouts in the long-term is likely to be disappointed. We expect executive pay to plateau for a period, rather than fall dramatically.

“In all of the debate around executive pay, perhaps most worrying is the impact on the image of the UK as a place to do business. Nearly two thirds of companies said the scrutiny on executive pay is making the UK an unattractive location for executives. The UK benefits hugely from the flow of talent to our shores, bringing with it investment, jobs and tax revenues and care must be taken not to damage our competitive position.”

Remuneration committees have come under pressure over the last twelve months since the so-called "shareholder spring" saw downward pressure being put on pay deals.

Helen Roxburgh


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