Most FTSE companies adjusted executive pay during pandemic

11 May 2021 5 min. read

UK-listed companies have been factoring in the impact of the ongoing pandemic into executive pay, according to an analysis of Alvarez & Marsal, with more than half of CEOs and CFOs facing pay freezes.

The research, which was conducted by Alvarez & Marsal (A&M)’s Executive Compensation practice in the UK, analysed what how FTSE listed companies have been dealing with their remuneration policies over the past year. This saw the researchers delve into the decisions made of around fifty companies listed on the FTSE 100, FTSE 250 and FTSE Small Cap exchange.

The management consultancy found that remuneration committees had to take a number of hard decisions in 2020 and early 2021. Along with closures and redundancies, these also saw firms factor in the impact of furloughs and other government support, and capital raises or dividend cancellations, into the salary structures for their top executives and board members.

Most FTSE companies adjusted executive pay during pandemic


According to A&M, following a difficult 2020, renumeration committees have generally erred on the side of caution when it comes to executive pay. While the average CEO salary increase across all companies in 2021 still stood at 2.4%, a hefty 54% of companies said they had frozen pay for their Chief Executive Officer and Chief Financial Officer.

In a bid to take the pandemics impact on their stakeholders into account, the pay increases which did occur were reportedly tied to the company’s wider workforce. Around 92% of companies told A&M that if they awarded executive directors a pay increase, it was in line or below boosts to salaries across their whole headcount.

At the same time, firms who furloughed staff during the pandemic have sought to make up the lost productivity from doing so by putting temporary reductions on fixed pay for directors in place. 94% of firms who furloughed staff did this, typically cutting pay for executive directors by 20% for three months.


Following on from this, A&M asserted that remuneration committees’ approach to bonuses in 2020 shows a great majority of companies “demonstrated restraint.” Contrary to the behaviour of many executives during the banking crisis, in this case 46% of CEOs and executive directors did not receive a bonus during the crises of 2020.

A&M confirmed that in half of these cases, this was because minimum performance thresholds were missed. At the same time, the remainder of cases where no bonus paid were due to the bonus being waived, the bonus plan being suspended, or the remuneration committee “exercising discretion to reduce bonus payment to zero.”

Finally, 76% of companies that received Government or shareholder support decided not to pay a bonus to executive directors. Again, taking into account the impact of the pandemic on stakeholders, most firms which raised funds through dividend cancellation or capital raising decided not to award bonuses.

Long-term incentive plan

A long-term incentive plan (LTIP) is a company policy that rewards employees – often in the form of shares – for reaching specific goals that lead to increased shareholder value. Only after fulfilling certain conditions, can the employee receive an unconditional award such as matching shares or a discount on a personal investment.

A&M found that in 36% of companies, no long-term incentive awards were made, as the impact on the firm’s financial performance meant performance thresholds were not met. The study meanwhile found that of the two thirds of companies that had LTIPs vesting, only one company’s remuneration committee attempted to increase the level of vesting while targets were missed as a consequence of the pandemic. In that case, shareholders ultimately responded with a significant vote against.

Due to all of the above, A&M concluded that the average CEO single figure of remuneration was less materially in the last financial year, compared to that of 2019. Looking forward, A&M expects further moves to maintain discretion regarding executive pay.

The researchers stated, “Over the next year, we expect more companies to review executive pay policies and begin to think about making more radical changes to LTIPs. In addition, as was the case after previous crises, if there is significant shareholder dissent on remuneration resolutions in 2021, we may see voting agencies, regulators or legislators respond with tighter guidance or rules, which may further reduce remuneration committees’ scope for judgement and discretion.”

Executive pay

Executive pay is an especially hot topic at times of crisis. With firms cutting costs to preserve their bottom lines, it is often a major sticking point that the rank and file workforce should take pay reductions, or redundancy, while their company’s upper management continue to live high and wide. This was particularly prominent during the 2008 economic crisis and its fallout – but amid the pandemic and recession of the last year, executive pay is once again making headlines for all the wrong reasons.

At the start of 2021, it was reported that bosses of top British companies would have made more money by the 6th of January than the average UK worker will earn for the 12 months. Independent analysis by the High Pay Centre thinktank further illustrated the vast gap in pay between Chief Executives Officers and everyone else, by stating that CEOs of FTSE 100 companies are paid a median of £3.6 million a year, which works out at 115 times the average annual £31,461 salary collected by full-time UK workers.

In this case, a pay freeze among executives might not seem all that accommodating then – especially as even with a pay freeze, the average worker would still need to work for more than a century to earn the median FTSE 100 CEO salary. According to research from PwC, however, family run businesses went further than their FTSE counterparts in keeping their businesses afloat at their own expense. Around 40% of UK family business executives took a pay cut over 2020.