The bosses of Britain's largest listed companies are being offered US-style pay packages worth up to £28 million a year, according to a survey by The Financial Mail on Sunday.
Leading firms are looking to boost how much their chief executives can earn as they compete in what they describe as an increasingly international market for top talent. Boardroom pay has risen steadily since the pandemic, while broader real wage growth has flatlined.
A typical FTSE 100 boss earned just over £5 million last year. The highest paid was Pascal Soriot at drugs giant AstraZeneca, who took home £17.7 million.
The ceiling on executive pay is rising fast as bonuses, which make up the bulk of boardroom pay packets, are increasingly paid in shares, and stock markets remain buoyant. An analysis of the latest FTSE 100 accounts found three companies where potential pay awards for chief executives could top £20 million this year if targets are met and where the share price has risen by 50 per cent over three years.
Shell, Rolls-Royce and Unilever in line for biggest payouts
The biggest potential winner is Shell boss Wael Sawan, whose £13.8 million pay could double if he hits his performance goals. The oil giant recently reported bumper half-year profits fuelled by higher energy prices since the US-Iran war erupted.
Also in line for a large payday is Tufan Erginbilgic, who has led a turnaround at engineer Rolls-Royce. He earned £4.4 million last year, but that figure could rise to £24.4 million in a best-case scenario.
Unilever's new boss, Fernando Fernandez, is also in line to join the £20 million club if he delivers on all his targets at the consumer goods group. All three companies had their new pay plans approved recently by shareholders, who are taking a more sanguine view of what has been a contentious issue.
How UK pay compares with the US
A typical FTSE 100 boss still earns less than half the £12.2 million paid on average last year to the head of an S&P 500 company, according to pay advisory firm ISS Corporate. Experts say part of the gap exists because, unlike in the UK, US bosses often combine the roles of chief executive and chair, giving them more power and responsibility. Another reason cited is that some US companies are better run than their UK rivals, with higher profit margins and higher stock market valuations.
Shareholders demand justification for big packages
Shareholders appear willing to tolerate very large pay packages if they are matched by strong performance. Bernadette Young, head of corporate advisory firm Indigo Governance, said the key issue for boards comes down to justifying and explaining their decisions effectively.
She said boards need to show how remuneration is linked to stretching long-term performance targets, and how that supports the interests of shareholders and wider stakeholders, including employees. She said getting that right can accelerate growth and benefit the economy as a whole.
More firms set to raise pay caps
More companies are expected to lift the cap on top earners when their pay plans are renewed, including AstraZeneca, which is discussing a new pay policy for Soriot with shareholders ahead of a vote at next year's annual meeting. Despite being the FTSE 100's highest-paid boss, Soriot's pay remains below the average for his global pharmaceutical peers.
Sheri McCoy, who chairs AstraZeneca's pay committee, wrote in the latest annual report that the company aspires to close this gap over time.
Shell benchmarks its chief executive's pay against a wider group of companies, ranking them by stock market value, annual revenues and assets. The company said that since Sawan took over at the start of 2023, Shell has delivered strong financial and operational performance, outperforming its peers.
Rolls-Royce said its new pay arrangements were a strategic priority to enable continued business outperformance. Unilever said it needed the right remuneration tools to continue attracting the best people across all regions, with differentiated reward for high performance.
