Around a quarter of FTSE 100 companies have frozen salaries, according to research by Hewitt New Bridge Street.
Where salaries were increased for 2011, this was typically a modest 3%, broadly in line with inflation and workforce salary increases.
The report, FTSE 100 directors’ remuneration 2011, also showed the median value of long-term incentive awards in 2010/2011 has remained largely unchanged compared with the previous year, while the maximum bonus potential for FTSE 100 executives also remained stable year-on-year at 180% of salary (for the highest paid director).
However, bonus payouts were higher than in the previous year, at around 150% of salary at the median, although the majority of organisations (over 70%) include partial deferral of bonus, and over a third (35%) now include a provision for bonus clawback.
Rob Burdett, a principal consultant at Hewitt New Bridge Street, said: “In recent years, FTSE 100 companies have responded to the challenging economic conditions with widespread freezes in annual salary.
“In addition, and particularly over the past 12 months, we have started to see signs of some permanent shifts in the way that executives are rewarded.
“This can be seen in the moderation of the total reward potentially available, plus the increasing use of more sophisticated mechanisms, such as deferral and clawback, which further allow organisations to hold executives accountable for performance.”
Other key findings include:
- Base salary comprises up to around 30% of total remuneration.
- Variable pay accounts for around 60-65% of a typical FTSE 100 executive director’s remuneration package, although this increases to 70% for larger companies, such as those within the FTSE 30.
- Approximately 60% of variable pay tends to be share-based and relates to long-term performance conditions, such as total shareholder return, earnings per share and return on capital employed.
- Actual bonuses earned by the highest paid director during 2010/2011 were around 150% of salary (versus 120% of salary for the year 2009/2010), or between 80% and 90% of the maximum bonus potential.
- The most common pension provision is the sole operation of a defined contribution (DC) scheme, which is offered to 30% of newly appointed directors, although 40% of new directors received cash supplements (up from 30% last year).
- The median contribution to a DC plan is around 20% of salary.
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