The body representing the UK’s asset management industry has hailed a fall in CEO pay as “a welcome sign” that companies are beginning to listen to investor concerns.

The Investment Association (IA) was commenting on a new report on FTSE 100 pay published today by the High Pay Centre and CIPD, the human resources professional body.

Andrew Ninian, director of stewardship and corporate governance at the IA, said: “Shareholders play a key role in helping to drive change on executive pay and engage throughout the year with companies and their directors who set pay to make sure it reflects investor priorities.

“That engagement is clearly working, as in 2019 more than 50 companies have promised to cut their executive pensions because of a campaign by shareholders , while the increased number of votes against individual directors show that shareholders will hold them to account if a company’s approach to pay is unacceptable.”

The UK’s revised corporate governance code includes a new provision that pension contribution rates for executive directors should be aligned with those available to the wider workforce. The IA made executive pension packages a focus ahead of this year’s annual general meeting season.  

FTSE 100 CEO pay down to £3.5m

According to the High Pay Centre and CIPD report, median and average pay packages for chief executives of the top UK-listed companies fell 13% and 16%, respectively, between 2017 and last year.


Credit: Steve Buissinne

Less money was awarded through long-term incentive plans last year, the report found

In a press release, they said the fall in CEO pay was likely to be due to a combination of factors. These included less money being awarded through long-term incentive plans due to variable corporate performance, and the cyclical nature of payouts.

There was also the “the possibility of greater restraint on high pay, which is to be welcomed”, the organisations said.

The report followed a similar study by Deloitte, which put the size of the FTSE 100 CEO median package at £3.4m (€3.7m), down from £4m. The figures are largely in line with those from the CIPD and the High Pay Centre.

According to Deloitte, around one third of FTSE 100 companies had reduced pensions for new executive hires. Although fewer of companies met with “low votes”, shareholder support for executive pay at FTSE 250 companies fell to its lowest in five years.

Stephen Cahill, vice chairman at Deloitte, said: “It has been a quieter AGM season for the largest companies, with fewer shareholder revolts. However, investors have shown that they will continue to bite when companies fall foul of their expectations on pay.”

Resolutions supported by fewer than 80% of the votes cast are considered by a number of bodies in the UK as having met with significant shareholder dissent. 

Investor pressure weighed

The High Pay Centre and CIPD also sought to gauge the relationship between executive pay and shareholder influence.


The High Pay Centre and CIPD found that the higher a CEO’s pay, the less support the remuneration report got from shareholders

In their report, however, they said that shareholder ‘say on pay’ – shareholders’ right to vote on companies’ future remuneration policy at least once every three years – seemingly had “little effect on restraining top pay”.

This was on the basis that, between 2014 and 2018, every FTSE 100 company pay policy put to a vote at an annual general meeting was passed, and in 2018 most remuneration packages were voted through with support of 90% or more of shareholders.

Some companies have sought investors’ views on executive pay before deciding on a policy or outcome in a bid to avoid significant opposition.

According to the High Pay Centre/CIPD report, there was a strong negative correlation (-0.59) between votes for the remuneration report and total pay for CEOs – known as “single figure pay” – meaning that the higher the pay, the less support for the remuneration report.

They added that the correlation between CEO pay and votes for the remuneration report was negligible when CEO pay was between £1m and £4m.

“At the same time,” the report continued, “our findings do suggest that shareholder pressure is a relevant factor in pay awards.

“Companies that award higher levels of pay are more likely to face higher levels of shareholder dissent, resulting in negative publicity for the company and individual directors”

High Pay Centre/CIPD 

“Companies that award higher levels of pay are more likely to face higher levels of shareholder dissent, resulting in negative publicity both for the whole company and for individual directors.

“This is likely to be a consideration, even if not an overriding one, for remuneration committees in making pay awards.”

The report also reported a “weak relationship” between pay and votes on the pay policy, which in the CIPD’s view “supports the argument that CEO pay packages are too complex – not even shareholders in the company know what the policies will result in”.

Luke Hildyard, director at the High Pay Centre, said: “There is still more to be done to align pay practices with the interests of wider society and give the public confidence that our biggest businesses are working for the good of the economy as a whole rather than the enrichment of a few people at the top.”