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Article | Executive Pay Memo – Western Europe

What are investors thinking about ahead of the 2024 AGM season?

Exploring diverse executive incentive structures

By Alex Little and Dr Richard Belfield | February 7, 2024

WTW carried out a series of interviews with a number of institutional investors and proxy agencies across Europe, to canvass their views on executive remuneration ahead of the coming 2024 AGM season.
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It is worth noting that investors do not speak with a unified voice. While there are areas of consensus, there are different views on important points, such as the extent to which investors accept company arguments that it may be necessary to go beyond typical market practice to compete with global / US talent market competitors.

These differences reinforce the importance of knowing the perspectives of your specific shareholder base and engaging with these investors when making significant executive pay decisions.

Wider stakeholder experience

There was consensus from all stakeholders we spoke to that it was critical for companies to focus on pay for the wider workforce and include detailed disclosure on this in annual reports, with investors stating that much attention was paid to this when judging the appropriateness of executive arrangements. Investors generally noted that most companies had taken external views on this thoughtfully into account and demonstrated restraint on executive pay versus that of the workforce.

In relation to salary increases, going into the 2023 season Institutional Shareholder Services (ISS) amended their UK & Ireland voting guidance to emphasise that adjustments for executive directors should ideally be lower than those for the wider workforce (rather than their previous request for alignment). Most investors we spoke to took the position that executive salary increases aligned with the workforce were generally acceptable as long as the percentages were relatively modest and accompanied by clear explanation.


It was noted that by a number of investors that disclosure across Europe has improved but that there will be a continuing focus on this area with an ongoing expectation on companies to fully report on details of incentive performance targets and outcomes against them.

Increasingly, Environmental, Social and Governance (ESG) targets will be subject to the same level of scrutiny as has previously been the case for financial targets and it will be important for companies to explain how these have been set and how they align with their wider sustainability strategy.

There remains a tougher line on companies considering adjusting in-flight targets or exercising upwards discretion on incentive outcomes. Unless accompanied by very compelling rationale such discretion is likely to be unacceptable. However, investors do consider each company on a case-by-case basis and more understanding would potentially be given to companies which clearly set out context, detail and rationale for executive pay decisions.

Debate on global competitiveness

In the United Kingdom (UK) in particular, in recent months there has been much debate about competitiveness. Pay is just one aspect of this debate but it is part of a wider discussion on ensuring the governance environment in the UK does not prohibit competitiveness.

We are aware that there are a number of companies currently in the process of engaging with investors with a view to seeking approval in 2024 of arrangements outside the current range of typical market practice – either in terms of incentive opportunity levels or structure (for example, introducing ‘hybrid’ long-term incentive plans which combine awards of performance and restricted shares). The rationale of these companies is typically that such changes are necessary in order to successfully compete for talent against global / US peers.

It is clear that the market has not come to a settled view on this debate and this was the area where there was perhaps the widest range of perspectives and nuances of emphasis between the stakeholders we spoke to. Even those at the end of the spectrum most resistant to a change in market norms expressed sympathy with the issues that truly global companies have in recruitment and retention – though emphasising that the number of these is limited. Others stated that, while they might previously have approached significant market atypical changes with caution, they are open-minded and would determine whether to support specific proposals on a case by case basis, taking into account discussions with the company and accompanying rationale, which must clearly make the case for why such changes are appropriate and necessary in the particular circumstances.

There was generally more openness to companies making proposals on structure such as hybrid LTIs but more cynicism about proposals to significantly increase levels and these are likely to continue to be subject to considerable scrutiny.


Going into the 2024 season, it may be the case that at the margin there may be some movement towards a broader range of executive incentive structures. However, the fundamentals of clear and transparent disclosure around any decisions taken and persuasive rationale for any proposals in the company’s specific circumstances remain vital to gaining shareholder support. Investors have a range of nuanced perspectives and knowing the views of, and thoughtfully engaging with, your company’s specific shareholder base continues to be a critical part of the decision making process for Remuneration Committees.

We will be monitoring outcomes as we move into the forthcoming AGM season to understand direction of travel on topical voting issues and will provide updates in due course.

If you have any questions or would like to discuss the implications of any of the above on your executive compensation decisions, please contact Richard Belfield or Alex Little.


Senior Director, Executive Compensation & Board Advisory

Senior Director, European Executive Compensation & Board Advisory Practice Leader

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