Executive pay at FTSE 100 firms back to pre-pandemic levels, PwC analysis shows

• Average total pay for FTSE 100 CEOs increased from last year’s dip - £4.2m in 2019, £3.1m in 2020, and £4.1m in 2021
  
• Average 2021 bonus was 82% of the maximum opportunity, compared to 44% in 2020 and 66% in 2019 
  
• Looking ahead, only 17% of CEOs have had their salary frozen for 2022 compared to 47% in 2021
  
• The pandemic continues to impact long-term incentive outcomes, with an average outcome of 46% of maximum in 2021 compared to 67% pre-Covid
  

FTSE 100 pay has returned to pre-pandemic levels in most sectors, according to PwC analysis of the first 50 FTSE 100 companies to publish their 2021 annual remuneration reports. The average total pay for CEOs in our sample has increased by 34% from £3.1m in 2020 to £4.1m, largely returning to pre-Covid levels - £4.2m in 2019. This has been driven primarily by a significant increase in annual bonuses, with the average paid exceeding pre-Covid levels. 

Average executive bonuses for 2021 increased significantly to 82% of the maximum opportunity, driven by a post-Covid boom in some sectors and, in some cases, strong performance against perhaps more conservative targets which were set at the start of 2021 to reflect greater market uncertainty. This compares to 44% in 2020, when business performance was challenged by Covid and some bonus schemes were cancelled. 

Increasing use of ESG measures

Increased government, public and corporate focus on environmental issues leading up to, and following on from, COP26 has been reflected in incentive plans. PwC’s analysis shows 86% of companies using ESG measures in their annual bonus and/or long-term incentive plan for 2022, compared to 64% in 2021.

For annual bonus plans, social measures remain the most common form of ESG metric (50% of companies), dominated by diversity & inclusion, health & safety, and employee engagement. There has been a notable increase in adoption of environmental measures, such as emissions and energy reduction metrics - up from 30% in 2021 to 42% in 2022. For long-term incentive plans, environmental measures remain the most common - up from 26% in 2021 to 40% in 2022. 

Phillippa O’Connor, reward and employment leader at PwC, comments:

“While we are early into the AGM season, the first results out the door are showing an uplift in executive pay as businesses were boosted by countries opening up and demand returning. Whether this uplift is a one-off or will continue is unclear given continuing lockdowns in Asia and the war in Ukraine. 

“The impact of Covid continues to vary across sectors. Banks, financial services in general and the construction industry have bounced back and this will be reflected in executive pay decisions. While other sectors, such as travel, hospitality, and retail, are still feeling a drag from the pandemic. The differentiation in sector performance plays through in executive pay. 

“It’s certain though that shareholders will scrutinise both the overall bonus outcome and how stretching the performance targets were. Bonus levels are likely to dominate voting results this AGM season - the acid test will be whether shareholders share a company’s view on performance and whether they are supportive of these outcomes.”

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