Rising Executive Pay in the UK
Legal & General (L&G) has joined a growing number of blue-chip companies in increasing the maximum salary its chief executive can earn. This move is aimed at preventing top executives from leaving for the US, where boardroom pay is significantly higher.
Antonio Simoes, L&G’s current CEO, could now receive up to £8.3 million in total compensation. This represents a substantial increase from the £3.1 million he earned last year, which was considered below market levels. The rise in pay comes as part of a broader trend among FTSE 100 firms to offer more lucrative packages to retain talent in an increasingly globalised job market.
The Mail on Sunday’s ‘Fat Cat Files’ revealed that the average FTSE 100 chief executive received £5.5 million in 2024. While this figure is significantly lower than the £12.2 million paid to the average S&P 500 CEO in the US, the gap is narrowing. UK-based multinationals are now offering more generous pay deals to compete with their American counterparts.
Examples of Increased Executive Compensation
Several major UK companies have already raised their CEOs’ pay packages. Shell increased Wael Sawan’s remuneration from £6.8 million to £13.8 million last year, with the potential for it to double to £20 million if certain performance targets are met. At Rolls-Royce, Tufan Erginbilgic’s pay could exceed £24 million this year if the company’s share price continues to rise.
WPP, an advertising group that was recently removed from the FTSE 100 index, plans to pay its new CEO, Cindy Rose, up to £14 million if share price and other performance targets are achieved.
Despite these increases, there has been a surge in shareholder protests against what many see as excessive executive pay. According to research firm Indigo Governance, the number of shareholder revolts at FTSE 100 firms nearly doubled last year, rising from eight to 15.
However, the government recently removed a public list that named and shamed companies with high executive pay. Corporate lobbyists had pushed for the change, arguing that the list harmed the reputations of leading firms. The government claimed the move would reduce bureaucracy and make London more attractive as a financial hub.
L&G’s New Pay Policy
L&G stated that Simoes’s £3.1 million pay last year was “below market levels,” noting that he had accepted a significant reduction in total remuneration when he left Santander two years ago. He also received £7 million in compensation from L&G for pay and bonuses forfeited when he left the bank.
The company’s new policy raises the bonuses Simoes could be paid. A maximum payout of £10.5 million would only be given if the share price rises by 50 per cent. The policy, which is reviewed every three years, will be put to a vote by shareholders at their annual meeting next month.
As Britain’s largest asset manager, L&G actively votes against pay plans of firms it invests in if they do not align with long-term shareholder interests. It recently opposed Elon Musk’s $1 trillion ten-year pay deal at Tesla, citing concerns that it did not require him to spend enough time at the company.
L&G also takes a strong stance on other issues. It is one of the top ten shareholders in BP and will vote against chairman Albert Manifold later this month as the oil giant shifts away from its green goals.
