PwC: Companies to reduce executive bonuses

By Rob Starr, Content Manager, Big4.com

According to a PwC survey of large UK companies, Many FTSE100 executives will see no increase to their annual bonuses this year and some bonuses could even be cut by up to quarter.

“The calls from shareholders for pay and bonus restraint appear to have hit home. Following a number of years in which bonuses had crept up to around 80% of maximum pay on average; we expect them to fall back towards target levels of around 60% of pay this year. This will mark the second successive year of bonus reductions in the FTSE100,” said Tom Gosling, head of the PwC reward practice. “It is clear that companies and remuneration committees are conscious of demonstrating a responsible approach to executive pay this year. We see evidence of companies showing restraint in pay increases, exercising greater rigour in bonus decisions and improving transparency through early adoption of BIS disclosure proposals.”

Fewer than 10% of those companies are expecting material increases to bonus pay-outs as remuneration committees plan to exercise restraint at upcoming AGMs. Nearly half (48%) of respondents expect bonus pay-outs will be about the same as last year, 21% think they will be at least 10% lower and 17% predict they will fall by more than a quarter.

Despite remuneration committees being keen to demonstrate restraint, the PwC survey suggests that there is unlikely to be a large drop in executive pay levels in the UK over the longer term. Only 15% of respondents said they expected total executive pay levels to be more than 10% lower in their organisation in three to five years’ time. Most (55%) felt it would be about the same and a quarter thought it would be up to 25% higher.