FTSE 100 CEO Pay: A New Era of Bumper Awards?
British companies are increasingly approving substantial pay increases for their chief executives, signaling a shift in investor attitudes. Recent moves by Smith & Nephew, Rolls-Royce, and Shell demonstrate a willingness to reward top leadership with packages reaching into the multi-millions, with less of the shareholder backlash seen in previous years.
The Rising Tide of Executive Compensation
Smith & Nephew recently doubled Deepak Nath’s maximum potential reward to $15.3 million. This follows similar increases for Tufan Erginbilgiç at Rolls-Royce and Wael Sawan at Shell. What’s notable is the relative silence from shareholders, a stark contrast to the rebellions witnessed in 2019 when CEO pay sparked widespread criticism.
From Outrage to Acceptance: A Changing Landscape
In 2019, Rachel Reeves, then chair of the business select committee, condemned excessive CEO pay as “dishonourable” and “corrosive of trust.” Today, as Chancellor, she is engaging with FTSE leaders to encourage investment in Britain. This shift reflects a broader acceptance of higher pay, particularly as UK-based executive compensation had already begun to outpace that of their American counterparts in 2025.
The “Americanization” of UK Executive Pay
A key driver behind the increases is the perceived need to compete with US companies for talent. Boards are increasingly concerned about losing key executives to American firms offering more lucrative packages. The Investment Association’s more flexible guidelines have as well contributed to this trend, encouraging a more pragmatic approach to remuneration.
As one FTSE chair stated, “The City has to choose: if it boldly rejects the US approach to high pay as an outlier in the world, then it must also reject having US chief executives or executives who live in the US.”
International Executives and Retention Risks
Several FTSE 100 CEOs, including Smith & Nephew’s Deepak Nath and Barclays’ C.S. Venkatakrishnan, reside in the US. This international presence, coupled with large overseas operations, is seen as a justification for higher pay to retain these valuable leaders. Namal Nawana, a former Smith & Nephew CEO, left the company in 2019 due to pay disagreements, highlighting the retention risks companies face.
Performance and Justification
Many companies are pointing to improved share prices as justification for the pay increases. The FTSE 100 has risen nearly 20% in the past year and 55% over the past five years. Still, advisors emphasize the need for a clear link between pay and performance, and caution against simply benchmarking against peers without considering company-specific factors.
Banking Sector Leads the Way
The banking sector is at the forefront of this trend, with payouts reaching the highest levels in over a decade. Barclays’ C.S. Venkatakrishnan received a record £15 million, while HSBC’s Georges Elhedery could receive up to £19.8 million. Lloyds Banking Group and NatWest Group also increased their bosses’ pay by 20% and 35% respectively last year.
Looking Ahead: AGM Season and Investor Scrutiny
As companies approach AGM season, shareholder votes on CEO pay will be closely watched. While the current environment appears more receptive to higher pay, investors are still expected to demand a strong link between remuneration and performance. The IA has warned against generic justifications for pay increases.
Frequently Asked Questions
- Why are CEO pay packages increasing? Increased competition for talent, particularly from US companies, and a more flexible approach to remuneration guidelines are key factors.
- Are shareholders objecting to these pay increases? Currently, there is less shareholder resistance compared to previous years, but investors still expect a clear link between pay and performance.
- What is the role of the Investment Association? The IA has provided more flexible guidelines, encouraging boards to be pragmatic rather than rigidly adhering to pay rules.
- Are international CEOs being paid more? Companies with international CEOs often justify higher pay to retain talent and compete with global compensation standards.
Pro Tip: Shareholders are increasingly focused on the long-term sustainability of a company’s performance, not just short-term gains. Executive compensation plans should reflect this focus.
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