The number of long-term incentive plans (Ltips) submitted by FTSE 350 companies to shareholders in 2009 fell by 42% year-on-year.
Just 41 new or significantly amended executive Ltips where submitted in 2009 compared to 71 such plans submitted in 2008, according to research by KPMG published in its latest Employee incentives update.
Chris Page, associate partner heading up the remuneration team at KPMG in the UK, said: “Many FTSE 350 companies which may otherwise have chosen to review their executive long-term incentive arrangements during 2009 took the view that they did not wish to invite comment on new plans, at a time when business performance was static or worse.”
One of the predictions made for 2009 was there would be an increase in the number of one-off arrangements for executive remuneration put in place to reflect exceptional circumstances or specific business objectives.
In fact, within the FTSE 350, there were only two plans of this type put to shareholders during the year.
The decline in total new or amended plans was largely due to a reduction in the number of new plans.
The number of amended plans was relatively steady at 21 in 2009 compared to 32 in 2008.
Despite the sensitivities around the issue of executive pay, when it came to plan amendments, some companies were prepared to be more aggressive in their approach, typically by increasing the size of awards made under their Ltips or by adjusting performance targets downwards to reflect changing economic conditions.
The number of ‘red tops’ issued by the Association of British Insurers in relation to Ltips more than doubled year on year (from four in 2008 to 11 in 2009) with over a quarter of new plans or amendments put to shareholders receiving this rating.
Factors suggest the number of new plans and amendments to existing plans may increase significantly during 2010.
Page explained: “Changes in financial services regulation will have an impact on Ltip design, as will, proposed changes to the Combined Code.
“Additionally, there may well be a ‘backlog’ of reviews postponed from 2009 which companies may want to address in 2010. But ultimately, the outlook will depend on the overall state of the economy.”
Read more on long-term incentive plans