Pandemic pay cuts for FTSE 100 bosses ‘superficial’

Short-term executive pay cuts during the coronavirus pandemic will not be enough to address a culture of excessive bonuses at top UK firms, according to a new report.

In their latest annual report on executive pay, the CIPD, the professional body for HR, and the High Pay Centre found that 36 FTSE 100 companies have announced cuts to bosses’ pay in response to the Covid-19 crisis and economic downturn. However, this doesn’t signal a sea change for reining in excessive incentives, the authors said.

Most of the companies have used a combination of measures to cut pay, but the report suggests these are mainly superficial or short-term.

The most common measure, taken by 14 companies, has been to cut salaries at the top by 20% — yet salaries typically only make up a small part of a FTSE 100 CEO’s total pay package.

CEOs at 11 companies have seen their Short-Term Incentive Plans (STIPs) cancelled, while two other firms have deferred salary increases.

None of the 36 companies have reduced their CEO’s Long-Term Incentive Plan (LTIP), which typically makes up half of a chief executive’s total pay package.

In the financial year ending 2019, FTSE 100 CEOs took home a median pay package worth £3.61m — 119 times greater than the median earnings of a UK full-time worker (£30,353). This is broadly the same as the median FTSE 100 CEO salary of £3.63m in the previous financial year.

“We continue to find a disconnect between the total reward packages of CEOs in the FTSE 100 and their actual contribution to long-term company performance,” said Peter Cheese, chief executive of the CIPD. “Too big a share of CEO payments depends on the fluctuating fortunes of the stock market and not enough on whether they are a responsible custodian of the business for all stakeholders, including, of course, the workers who drive long-term value.”

The CIPD and High Pay Centre called for reform of the remuneration committees that set executive pay, and decisions on top pay and bonuses to be more fairly aligned with wider workforce pay.