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Ernst & Young: FTSE 250 adopted a more ‘cautious approach’ to executive pay this year

By Rob Starr, Content Manager, Big4.com

According to an Ernst & Young report released recently , the median salary for CEOs of FTSE 250 companies increased by 3.1%, while 17% were subject to a pay freeze. In comparison the median salaries of CEOs in smaller companies increased by 2.3%, with over 27% experiencing a pay freeze. Ernst & Young’s report, Changing landscape of executive remuneration, analyses current trends and market practice in director’s remuneration in over 600 FTSE 250, FTSE Smallcap, FTSE Fledgling and AIM listed companies.

For FTSE 250 executives, there was a continuation of homogenous long term incentive design, with nil-cost options and relative Total Shareholder Return (TSR) and/or Earnings Per Share (EPS) growth performance conditions dominating.  However, vesting remains weak with LTI awards failing to vest for over 50% of executive roles.  In the smaller companies, the majority of executives received no value from long-term incentive vesting.

With the UK’s economic recovery expected to be slow and patchy, growing by just 1.2% next year according to forecasts from the Ernst & Young ITEM Club, the report says that remuneration levels in 2013 are likely to remain constrained.

Giles Capon, leader of Ernst & Young’s UK and Ireland Performance and Reward team commented: “Increases to base salaries, from the FTSE 250 through to FTSE Fledgling, have been modest. Shareholders have taken a tougher stance over remuneration levels due to growing concern and scrutiny over the perceived misalignment between corporate performance and reward payouts, while the ongoing economic uncertainty is also encouraging greater restraint.”

 

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