Early insights from FTSE 100 Directors' Remuneration Reports - 2023

Nine years on from the first introduction of binding votes on remuneration policies, the triennial 'wave' of renewals has flattened somewhat, due to companies occasionally putting policies to vote outside the three-year cycle as well as newly IPO'd companies joining the index over time. So far this year, 57% of companies have published a new policy for approval (2022: 30%).

Our annual investor outreach exercise at the end of 2022 highlighted three major areas of focus going into the 2023 season:

• ED salary increases: in the context of current high levels of inflation and increases in the cost of living, there is an expectation that salary increases for executive directors [EDs] should be below those of the wider workforce and that companies should be focusing particularly on pay for the lower paid, as they are disproportionately affected.
• Windfall gains: companies should clearly disclose the approach they have taken to assess whether EDs have benefitted from windfall gains, i.e. that a relatively large number of shares may have been granted under long-term incentive plans in early 2020 following significant COVID-19 induced share price falls, and apply downwards discretion as appropriate.
• ESG: while there are differing views from investors on how/where ESG measures should be incorporated into variable remuneration, it is clear that they should be aligned to a company's wider messaging on ESG, be quantifiable and robust.

Following the Investment Association's (IA) updated Principles with respect to Non-Executive Director (NED) fees, which encouraged companies to ensure fees reflect the increased complexity, skillset and time required to fulfil the role, we anticipated an increase in the number of companies reviewing Chairman and NED fees.

Download our report to discover the picture so far.

Authors

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Karen Depoix

Director, Head of Research and Trends EC&BA GB

email Email phone +44 7432 694148

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Jane O'Reilly

Senior Director, Executive Compensation & Board Advisory

email Email phone +44 7789 930817

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