FTSE 100 CEO remuneration hits half a billion - with over 50% awarded in opaque and complex LTIPs

  • Nearly three-fifths of FTSE 100 CEO remuneration packages is in LTIPs
  • Only 16% of total remuneration is base pay, with around one-fifth linked to individual performance through a bonus
  • Recent reforms go some way to increasing transparency - but more fundamental change to corporate culture and practice is needed to restore trust in business

Total remuneration packages among the FTSE 100 exceed £550m – equating to a mean annual package worth £5.6m. Yet according to research conducted by the Chartered Management Institute (CMI), the professional body for management and leadership, three-fifths of FTSE 100 CEO pay is made up of LTIPs* and shares rather than base salary. LTIPS are the area of pay least tied to performance, often linked to market factors out of the realm of CEO control

The data reveals that, of the total remuneration package for CEOs, 56% is made up of LTIPS and shares, whilst only 16% is made up of base salary and 20% from annual bonuses which is attributed to the individual performance of a CEO. The remaining 8% is made up of other perks (such as pensions, taxable benefits and other benefits).

A recent report The High Pay Centre and CIPD highlighted that total CEO pay in the FTSE 100 rose by 11% this year at the same time as a study from the Recruitment and Employment Confederation showed that just 46.5%1 of companies have given workers a pay rise in the past year, highlighting the growing divide between CEO and lower-level pay.

The dominance of LTIPS raises fundamental questions about how we reward our top CEOs, as these rewards are often linked to share price movements outside of the CEO's control. It also highlights the fact that companies aren't being transparent about how they pay their top-level employees.

This level of CEO pay comes at a time when most of the workforce are being denied a pay rise – a stark reminder that CEO pay is out of synch with the rest of the workforce. CMI strongly supports the corporate governance reforms currently underway but believes more fundamental change is needed to improve transparency and accountability at the top, and restore trust in business. CMI's research shows only 36%2 of Britain’s middle managers say they trust their business leaders.

The best-led businesses define their purpose not in terms of short-term financial results, but on the long-term value they create for customers and stakeholders. CEO remuneration should be linked to measurable progress on these fronts and move away from these complex LTIPs that are often weakly linked to executives’ performance.

Ann Francke, chief executive of the Chartered Management Institute

For more information on CMI’s Management Manifesto Leading for Change, visit, www.managers.org.uk or read the full report.

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Notes to editors

Research Methodology

CMI undertook desktop analysis of the most recent annual report for all FTSE 100 firms between 14th and 16th August 2018. Data for remuneration was extracted and recorded for CEO, CFO and Chair, along with the gender for each role for each company.

* Awards that entitle participants to free shares after a performance period provided service and performance conditions are met.

1 The Recruitment and Employment Confederation undertook a survey of over 300 recruiters in partnership with Croner. For the full report, attract and retain top talent – Pay and benefits in the recruitment sector, visit: https://www.rec.uk.com/news-and-policy/research/latest-research/attract-and-retain-top-talent

2 For more information on CMI's building trust in business report, The Middle Manager Lifeline, visit: https://www.managers.org.uk/middlemanagerlifeline

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