Skip to content

29 March, 2023

Subscribe Advertise About Us
  • My Account
  • Register
  • Log In
  • Log Out

Board Agenda

  • Governance
  • Strategy
  • Risk
  • Ethics
  • News
    • Categories

      • View All
      • Board Moves
    • net zero plans

      Investors seek commitment to net zero planning

      Climate change campaigning investors have written to 107 companies, asking for prompt proof of net...

    • Mars ESG News round-up: this week in governance

      Mars CEO defends ESG and purpose; US president vetoes anti-ESG bill; trust can negatively affect...

    • ChatGPT technology Could ChatGPT technology join the board?

      Although governance may stop artificial intelligence replacing anyone on the board today, AI may soon...

  • Insight
    • Categories

      • View all
      • Governance
      • Strategy
      • Risk
      • Ethics
      • Board Expertise
      • finance
      • Technology
    • non-compete clause

      When employees become the competition

      How might you be affected by a global move towards the banning of employment contract...

    • data decision

      How to boost decision making

      Innovative digital tools can help boards to deliver against strategic objectives, but it is the...

    • remote working

      Navigating the new world of work

      Firms need to focus on building an inclusive environment and a culture of trust to...

  • Comment
      • View all
    • uncertainty in 2023

      Being a CEO in 2023: how to navigate uncertainty

      Agility, planning in the shorter term and bravery will all stand chief executives in good...

    • A week of business moving to the centre of human rights

      A week of events signals the initiatives underway to have companies play a central role...

    • audit reform IIA Why we need audit reform right now

      There is an "urgent need" for reform to the audit landscape as well as internal...

  • Interviews
      • View All Interviews
      • Podcasts
      • Webinars
    • life sciences podcast Reform of NHS levy ‘harms UK competitiveness’

      Boards in the pharmaceutical and life sciences sector face increasingly difficult decisions, according to a...

    • Board priorities 2023 Board priorities 2023: tact, trust and transparency

      We asked key figures what would help boards this year. The answers ranged from 'smarter...

    • Group of investors/shareholders in glass building Climate issues likely to figure prominently at next year’s AGMs

      A recent webinar heard that say-on-climate voting is expected to rise, while ESG remains a...

  • Careers
      • View all
      • Selection
      • Board Moves
    • female ceo Less than a third of FTSE 100 executives are women

      In Europe as a whole, only 7.7% of top companies’ chief executives are female, gender...

    • board size Performance declines as boards grow in size

      Researchers found that investment dropped by 2-3 percentage points as companies passed from 12 to...

    • Silicon Valley governance Silicon Valley improves its governance

      Big technology companies are stealing a march over other top corporates when it comes to...

  • Resource Centre
      • White Paper Downloads
      • Book Reviews
      • Corporate & Advisory Services
    • Diligent report

      Forrester: The Total Economic Impact Of Diligent Board & Leadership Collaboration

      Diligent Board Leadership & Collaboration reduced the risk of confidential material loss, supported decision-making, and...

    • Gender diversity barometer

      Barometer of Gender Diversity in Governing Bodies in Europe

      The 2023 Barometer of Gender Diversity in Governing Bodies in Europe looks at the 16...

    • geopolitical risk airmic

      Navigating geopolitical risk

      Today, the future feels less secure, and optimism is more restrained. Taking decisions in an...

  • Events
  • Search by topic
    • Governance
    • Strategy
    • Risk
    • Ethics
    • Regulation
    • ESG
    • Investor Relations
    • Selection
    • Board Expertise
    • finance
    • Technology

Covid-19: cuts to executive pay ‘mainly superficial or short term’

by Gavin Hinks on August 5, 2020

Only 36 FTSE 100 companies cut CEO pay as a result of the pandemic, while the median FTSE 100 CEO pay package fell by 0.5% in 2019.

CEO in face mask

Image: Black Salmon/Shutterstock

Despite widespread reports of Covid-19 prompting a rethink on executive pay, fresh research suggests the pandemic has had only a passing effect.

A new report concludes that only 36 companies in the FTSE 100 announced cuts to executive pay as a result of the crisis but these were “mainly superficial or short term”.

Conducted by think tank the High Pay Centre and HR body the CIPD, the report also finds that median chief executive pay in 2019 fell 0.5% on 2018. Median pay is now £3.6m for FTSE 100 chief executives, 119 times that of the average British worker.

According to the report, high pay levels are particularly “controversial” in the case of companies drawing on government support during the crisis.

“The current economic uncertainty should encourage companies to consider whether the scale of pay awards reflect good business sense and the CEO’s individual contribution to the company’s success. The relatively small cuts to pay that CEOs have made to date suggest this is not yet happening,” the report says.

Carum Basra, a policy adviser at the Institute of Directors, agrees—at least in part, saying “nothing is normal” in the current environment.

“Over the course of the crisis, we have seen taxpayers  support many businesses, including those in the FTSE 100. Boards should therefore think very carefully about how they reward executives, particularly when other stakeholders might be losing out—notably employees and hard-hit SMEs in their supply chains.”

Long-term incentive plans

Of the 36 companies that cut CEO pay, 14 made a 20% cut to chief executive salaries, often accompanied by a similar cut to non-executive fees. However, it’s possible the full extent of the impact of Covid-19 on executive remuneration will only be seen in next year’s survey.

In 2019 base salary made up 20% of chief executive pay while bonuses made up 23%, down from 26% in 2018. Long-term incentive plans (LTIPs) took up the greater share at 51%, up from 48%. Pension payments account for 4% and benefits another 2%.

The report says the use of LTIPS is “surprising”.

“Behavioural economics indicate that because of how these plans are designed in terms of the metrics used, or the form of the reward given, CEOs may not fully value them. Similarly, by focusing on financial measures, firms may be failing to recognise other drivers of performance, such as how people are managed, developed and rewarded, as well as how they treat their customers and the environment.”

The researchers are not alone in noting the LTIP issue. Sandy Pepper, a remuneration expert and professor at the London School of Economics, says: “The High Pay Centre’s research shows how long-term incentive plans, which have not typically been cut as a result of the Covid-19 pandemic, continue to have a disproportionate impact on executive pay in the UK.”

Investor pressure

The report notes that overall since 2011 both median and mean FTSE 100 CEO pay levels have seen no dramatic change. There could be several reasons for this, including corporate governance reforms, increased transparency and heightened investor pressure.

As the pandemic spread across the UK and concerns grew for the future of businesses, several investors—among them Hermes and Schroders—made it clear they expected chief executives to share the pain.

The report says that reducing the gap between “top earners and everybody” else could improve trust in business, an issue at the heart governance debates, including the move towards “stakeholderism” .

The High Pay Centre and CIPD report concludes: “The small fall in median CEO pay in 2019, following another fall from the previous year, should be considered a positive development. Though there is no ‘correct’ level of executive pay, it is clear from public opinion surveys that there is widespread scepticism about the need for very high levels of top pay.”

  • Facebook
  • Twitter
  • Google+
  • LinkedIn
  • Mail

Related Posts

  • CEO Covid pay cuts merely ‘symbolic’
    July 19, 2022
    pandemic pay

    Top-level pay was boosted to pre-pandemic levels by incentives schemes in many cases, leaving investors ‘outraged’, researchers found.

  • Executive pay rebounds as pandemic recedes
    April 20, 2022
    Covid-19 crisis and stock market prices

    PwC research looking at FTSE 100 remuneration reports reveals most sectors are seeing pay levels return to pre-Covid levels.

  • Executive pay, sustainability KPIs and the climate crisis
    December 1, 2021
    CSO with green tie and leaf in his top pocket

    Linking KPIs to sustainability targets results in complexity. A focus on corporate purpose is a better way to tackle climate change.

  • Companies made 'fake cuts' to CEO pay during pandemic
    March 30, 2022
    CEO in face mask

    Study shows US bosses who took salary cuts in 2020 saw no overall reduction in compensation once other elements were taken into account.

For thoughtful journalism, expert insights on corporate governance and an extensive library of reports, guides and tools to help boards and directors navigate the complexities of their roles, subscribe to Board Agenda

CEO pay, CIPD, coronavirus, executive pay ratios, executive remuneration, LTIPs, pay gap, The High Pay Centre

Search


Sign up to our Newsletter

Receive independent news, thoughtful journalism & expert insights about leadership, corporate governance & key boardroom issues straight to your inbox every week.

SIGN UP

Follow Us

 

 

 

 

Most Popular

  • Could ChatGPT technology join the board?
  • Larry Fink puts focus on finance and inflation
  • Call for FTSE 100 companies to give guidance on ethics
  • ESG resilience requires leaders to manage without certainty
  • News round-up: this week in governance

Featured Partner Profile

Diligent

Diligent

Diligent Corporation, which was founded in 2001, is headquartered in New York, NY with a European HQ in London. Diligent’s modern governance platform empowers leaders and teams at every level of the organisation to digitally transform and create ...

Featured Partner Resources

2022 AGM Season Forecast: An Eye on The Horizon

To help prepare for AGMs in 2022, Equiniti (EQ) hi...

Stakeholder Engagement: A Roadmap for UK Plc Boards

This guide aims to provide directors and their col...

Digital Boards: How Technology Adoption is Driving Culture Change and Resiliency

Digital tools proved their worth to boards during ...
Leadership in AI report

Leadership in AI

This report from Board Agenda and Mazars, in assoc...
Creativity in a Crisis: a Boardroom Map for Innovation

Creativity in a Crisis: a Boardroom Map for Innovation

In the uncertain times at the height of any crisis...
Board Directors Guide to D&O Liability Insurance - November 2020 - AIG & Board Agenda

Board Directors' Guide to D&O Liability Insurance

Directors face liability over a range of new threa...
Leadership-in-Risk-Management-Board-Report

Leadership in Risk Management: Board Report

Board Agenda, in association with Mazars and INSEA...
Director's Guide to Internal Investigations

A Director's Guide to Conducting Internal Investigations

An internal investigation must be handled meticulo...

 


 

ADVERTISE – FREE CORPORATE LISTING

FREE - Add your company profile to our Corporate & Advisory Directory.
ADD

ADVERTISE – PROMOTE YOUR REPORTS & WHITEPAPERS

FREE - Add your company profile to our Corporate & Advisory Directory.
Add Resource

Register Free

Register to receive free article views, selected resource downloads, and all the latest news alerts straight to your inbox. Register


  • Editors & Contributors
  • Editorial Advisory Board
  • Corporate & Advisory Services
  • Media Marketing Solutions
  • Contact Us
  • Careers
  • Board Director Network
  • Terms & Conditions
  • Privacy Policy
  • Cookies
  • Sitemap
|