Author: Sarah Jefferys
As we enter the season for planning for the next pay review cycle, it’s important to take the time to look deeper into Executive Reward, recognising the landscape of executive compensation continues to evolve significantly with a variety of factors impacting it including economic shifts, regulatory changes, and societal expectations, all of which also have implications for reward across the wider workforce.
Executive pay continues to be heavily scrutinised, particularly given the focus on greater pay transparency. As a backdrop, The Capital Markets Industry Taskforce wants to see higher CEO pay levels more akin to US heights to attract more investors and organisations into the UK, as well as strengthen the UK economy over time. This needs to be balanced with polling by the High Pay Commission, which indicates that most people think that CEOs should be paid no more than 20 times their typical employee1. In the UK, median FTSE 100 CEO pay currently stands at £3.81 million, 109 times that of the median UK worker. There are now 19 female CEOs at FTSE 100 and FTSE 250 companies, significantly ahead of the US where female CEO representation is significantly lower.
So, what trends from the 2024 Annual General Meetings (AGM) season do we see impacting companies’ approach in 2025? While there continues to be significant debate around recruitment and retention of CEOs, few companies experienced high levels of shareholder dissent on executive remuneration matters. This is reflective of those organisations being proactive and crucially, engaging with their shareholders at an early stage, so that sufficient time to discuss and debate proposals was allowed and ensured that proposals were supported – a useful learning going into the 2025 AGM season. This occurs within a context of relative stability in the legal and regulatory environment, which appears likely to persist through into 2026, as we move to increasing transparency on a global stage. Board Diversity continues to gain prominence – positively the FTSE Women Leaders Review Report highlighted that women now occupy 44.7% of positions on company boards across FTSE 100 companies, 42.6% across FTSE 250 companies and 43.4% across FTSE 350 companies2. Although its clear momentum is strong, it’s evident there’s a necessity to create opportunities for women to enhance female representation in executive leadership positions.
Our strategic guidance for your organisation, whatever the size is clear: Ensuring you have a robust reward strategy, supported by overarching reward principles, is the key to driving greater transparency across your organisation and with external stakeholders. It’s crucial that pay and incentive principles are clearly documented with the support of your Remuneration Committee.
Keep these questions in mind as you tackle executive compensation in the next round:
- Have you sourced appropriate sector specific data, and do you make use of a meaningful comparator basket of companies when surveying the market?
- Have you clearly stated your preferred market position – for example, are you a median market payer or do you position pay or total reward at upper quartile?
- What plans do you have in place, if required, to address any anomalies about your pay ratios and comparisons with the wider workforce?
- Have you clearly defined measures within your short and long-term incentive plans, which take account of both what needs to be achieved and how this will be delivered?
- Do your incentive plans reflect the appropriate risk appetite of the organisation whilst driving strategic performance in an engaging way, and are they aligned with corporate governance best practice?
We need to ensure that leadership teams supported by their executive boards, create an environment for growth and innovation to drive the organisation, and ultimately that of the wider UK economy, forward so all can benefit.
We can help you ensure you translate your comprehensive reward strategy into a coherent, meaningful set of principles to manage executive reward over the medium and longer-term.
To discuss challenges your organisation might be facing with Executive Reward, contact us today.
