Executive pay slides in UK but alignment to long-term goals and fairness still falls short

25 July 2017 Consultancy.uk

Executive pay fell over the past year, following continued discussion around executive pay and increased pressure from shareholders. Relatively weak set of voluntary moves are likely to see increased institutional pressure placed on executive remuneration in the coming years – particularly as wage disparity soars.

Executive pay across first 40 FTSE 100 companies – published in remuneration reports for 2017 – finds a real-terms decrease across most organisations. The median salary figure for the year saw total pay fall from £4.3 million to £4.1 million. The upper quartile saw the biggest decrease in pay, down a total of 13%, from £6.6 million to £5.7 million. 42.5% of all executives saw no increases in overall pay meanwhile in 2016.

The data, which is part of PwC’s wider reporting into executive pay across FTSE 100 companies, reflects what the firm identifies as increased pressure from shareholders to apply pressure to keep pay trends relatively subdued. This followed last year’s survey, which over the same period found that median pay had increased by around 2%.

The consulting firm notes that none of the FTSE 100 companies surveyed has yet moved to radically overhaul executive pay, even while there is continued pressure from the Investment Association Executive Remuneration Working Group and the BIS Committee for a complete overhaul. Executive pay, which has risen steeply over the past 30 years in relation to lower-level roles, appear to favour short-termism, and the suggested measures would aim to push booming executive pay packets back into line.

Hard work doesn't pay

As it stands, the majority of FTSE 100 companies (63%) are planning to make changes to their remuneration schemes, although PwC notes that analysis of the plans which tend to focus on ‘best practice’ changes, such as holder period and minimum shareholder requirements, tend to be relatively weak and do not tackle structural change in pay arrangements. Nor do they create incentives to focus on long-term company growth – something found to be highly beneficial for companies and their long-term stakeholders.

The research notes that 4 of the 40 companies has taken onboard recommendations to disclose the difference between executive and average employee pay, as key questions about fairness continue to surface – with labour increasingly losing out to technology and other means of cutting costs, while the executive reaps more and more rewards.

Tom Gosling, Leader of PwC's UK Reward Practice, commented, “Despite growing calls for reform, the continued divergence in shareholder views have made it too risky for FTSE 100 companies to contemplate radical change to pay design this year. This debate is far from over, given the recommendations of the BIS Committee. But real change is only likely to come after the Government's White Paper and a redraft of the UK Corporate Governance Code.”

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Independents more satisfied with career than employed consultants

29 January 2019 Consultancy.uk

Freelance consulting is one of the fastest growing segments of the UK industry, with a rising number of independents eating into the market share of traditional firms. According to a new survey, these often experienced professionals are usually much happier with their work having exited the high pressure environment of a firm’s office, with 86% saying they are satisfied with their career change.

With a booming gig economy driving growth in the country, the UK is home to more than 2 million freelancers. Many of these are independent consultants, who buck many of the other less palatable gig economy trends, as they typically command larger fees and higher levels of experience to leverage when negotiating with clients. At the same time, they are still significantly cheaper to hire than a broader consultancy, meaning many clients are increasingly inclined to hire independents

Over the past three years, this burgeoning portion of the consulting industry has been the subject of a growing body of research. One finding that has remained consistent among studies is that independent consultants are typically happier with their career than traditionally employed individuals. In 2016, one such study by Eden McCallum – a consulting firm which delivers projects with independent consultants – found that only 5% of independent consultants were dissatisfied with their career choice.

Then, the most important reason cited for high satisfaction was the intellectual challenge of the work – a dimension that is also regarded as the most important aspect for job satisfaction. The ability to choose the type of work (clients, projects) and the location of the engagement was the next biggest factor of freelancers enjoying their work.

Almost three years later, the latest edition of that same survey from Eden McCallum, in collaboration with London Business School, has polled over 400 consultants to see how things have changed. Broadly, the results remain the same. Independent consultants are happy with life, with the vast majority of 86% saying they are satisfied with working as an independent, and are more satisfied than employed consultants with their current professional life.

Overall satisfaction

This is reflected by the fact that a rising number of consultants are looking to follow their independent counterparts into freelance life. Eden McCallum’s data further emphasises this by finding that most deliberately chose to start independent consulting, and half plan to be an independent for more than three years, representing a large increase over the last 10 years. 

Satisfaction

As was the case previously, Eden McCallum’s research has found that independents are still more satisfied about many important factors in their professional lives. 78% of independents found that their work was more gratifying than when they were with a traditional firm. 61% said their work was more interesting, while 67% also noted the relationship between clients and themselves had improved. Notably, 91% felt their current work was delivering better value for money for clients.

Current independent consultants vs those at traditional consulting firms

Interestingly, there are notable generational and gender gaps in the attitudes of independent consultants, which the research brought to light. Researchers compared results of millennials versus 40+ years olds and found that millennials are more satisfied overall and are generally more positive about their current project; they are also 50% more likely than older peers to have made a deliberate choice to become an independent. This is largely because this group have found that compared to other opportunities for younger workers, independent consulting is working financially for them. 71% are earning more than when they were employed.

At the same time, women who go into independent consulting are more satisfied than men in the sector. While overall 73% of women and 80% of men said that their gratification in their work was higher compared to when they were employed in consulting firms, 57% of women said it was now much higher, compared to 42% of men.

While respectively 64% of women and 59% of men said their projects were more interesting than when they were employed, 39% of women rated the projects as much more interesting, versus 29% of men. Women also said that their work now is more efficient with 86% saying it is higher now than when they were employed versus 73% of men.

Rating of current work as an independent vs project work when employed in a traditional consulting firm

There are many casually cited reasons why women in consulting might feel better suited to independent life, including the suggestion that it is easier for 'working moms.' However Eden McCallum’s study finds that the two most important definers of personal success for women in the sector are the same as for men. High income is a priority for 51% of women, albeit notably lower than the 65% of men, but the point of interest here is that more women than men value the other top priority – feeling energised – most, at 54% to 45% respectively.

Work-life balance was slightly less important to women than men. Family time was an even lower definer of success – even though it was slightly higher than for men, only 26% of women still cited the aspect. This suggests that there are significantly more complex reasons for women entering this aspect of the workforce than have often been mentioned, and that the same factors that draw everyone else into independent work are at play among women looking to exit the consulting firm hustle.

Related: Four reasons independent consultants are happy with their career choice.