FTSE 100 Executives Earn Record £550m in Pay

Executive Pay Surpasses £500 Million for the First Time

In a year marked by rising executive pay, the total compensation for top bosses at FTSE 100 firms has surpassed £500 million for the first time. This trend is highlighted by the case of Peter Dilnot, who received a £45.4 million bonus from aerospace company Melrose. While this amount may seem trivial to someone like Elon Musk, it represents a significant milestone in corporate pay structures.

Dilnot and three other senior executives benefited from a share-based bonus scheme that was agreed upon five years ago and has now fully matured. Their bonuses stand out in an annual survey of boardroom pay, which shows a sharp increase in executive compensation. On average, these top bosses earned £5.5 million each in 2024, a rise of 11% compared to the previous year. This growth rate is more than double that of average earnings growth, sparking widespread concern among shareholders.

Shareholder Protests Over Executive Compensation

The surge in executive pay has led to a wave of shareholder protests. At Melrose, nearly two-thirds of shareholders rejected the pay deal, marking one of the most significant shareholder rebellions this year. The company took the rejection seriously and announced a new remuneration policy aligned with its peers in the FTSE 100.

This issue is not unique to Melrose. According to research firm Indigo Governance, the number of significant shareholder protests has more than doubled this year, with 11 FTSE 100 companies experiencing revolts of over 20%. Most of these protests were directed at executive pay. For example, at Centrica, 40% of investors voted against the company's pay report. CEO Chris O'Shea, who earned £4.3 million last year, admitted it was "impossible to justify" his pay while customers struggled with high energy bills.

Under regulations introduced during Theresa May’s tenure as Prime Minister, companies are required to report back to shareholders within six months if more than a fifth of them oppose a pay plan. The intention was to curb excessive executive pay through "naming and shaming." However, despite these efforts, executive pay continues to rise.

Rising Pay and Concerns About Inequality

Some companies are even looking to increase the maximum payouts for their executives. Tadeu Marroco at BAT could see his pay triple to £18 million if performance targets are met, while Emma Walmsley at GlaxoSmithKline could double her pay to £22 million. This trend reflects a growing alignment with US corporate practices, where executive rewards are typically higher and more accepted.

However, this shift overlooks the fact that many US companies are better managed and generate more profit than their UK counterparts. Additionally, many US CEOs hold both the roles of chairman and chief executive, which often justifies their higher pay.

London’s Struggle with Corporate Pay

London-listed companies are increasingly comparing themselves to their US peers, leading some to move their listings to New York to secure higher valuations. Firms like Wise, Ashtead, Flutter, and CRH have already taken this step. Even major players like AstraZeneca and Shell have considered leaving the London market, though Glencore recently abandoned plans to do so.

Bernadette Young of Indigo Governance expressed concerns about this trend, noting that it could negatively impact the British economy. She emphasized that excessive executive pay is difficult to justify when lower-paid employees face cost-of-living challenges.

Pay Gaps and Public Scrutiny

Melrose also topped the pay gap league, highlighting the disparity between executive and employee compensation. Dilnot earned 1,112 times more than the average Melrose employee, making his salary more than what most workers earn in a full year. On average, top executives earn 113 times the median full-time worker’s pay, according to the High Pay Centre.

The retail sector, known for low wages, has seen particular scrutiny. Investors managing over £1 trillion in assets targeted M&S and JD Sports at their annual meetings, urging them to disclose how many staff and contract workers are paid below the real living wage of £12.60 per hour. In response, a significant minority of shareholders supported fair pay resolutions.

Female Executives and Pay Disparities

Emma Walmsley, CEO of GlaxoSmithKline, remains the highest-paid female executive in the FTSE 100, despite a £2 million pay drop. She could potentially double her pay to £22 million under a new agreement aligning with US standards. Walmsley, who has led GSK since 2017, is also on Microsoft’s board and was made a Dame in 2020.

Amanda Blanc of Aviva ranks second in terms of executive pay. Meanwhile, women lead two of the largest water suppliers, but their pay has sparked controversy. Liv Garfield of Severn Trent and Louise Beardmore of United Utilities received £3.3 million and £1.7 million respectively. However, Beardmore will not receive a £417,000 bonus due to pollution-related restrictions imposed by Ofwat.