Boards are likely to be more careful after many executives were seen to have avoided a hit from the 2008 financial crisis © Jason Alden/Bloomberg

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More than half the chief executives of UK companies that have already reported 2020 figures received no bonus, as boards moved to counter investor criticism that bosses profited while businesses were hit by the pandemic.

Annual bonuses of the 45 companies that reported in the second half of 2020 were significantly lower than the previous year, according to an analysis by Deloitte. More than half paid no bonuses at all, while salary and pension allowances for executive directors also fell, Deloitte found.

These initial signs of pay restraint preface what could be a particularly combative AGM season, with investors already warning they will take a hard line on high executive pay at struggling companies.

Most FTSE 350 companies start to report their 2020 figures from February, which means boards will start making decisions over executive awards in the coming weeks. 

Mirza Baig, head of investment stewardship at Aviva Investors, said many shareholders had given companies some grace on pay in 2020 as they grappled with the pandemic. But he warned of “enough red flags” in the pay packages proposed in the last three months of 2020, particularly around long-term bonus awards, to “make us concerned about what is ahead”.

“2021 will be the acid test. Last year we voted against a third less [pay resolutions] than we did in 2019. The early signs are we expect that number to rocket back up in 2021,” Mr Baig said.

Big shareholders, including Legal and General Investment Management, the UK’s largest asset manager, and Schroders, warned companies last year that executives needed to share the pain of the pandemic.

Deloitte said boards were following investor guidance and demonstrating restraint when making decisions on executive pay amid Covid-19. Typically, annual bonuses make up around one-third of a chief executive’s total pay package.

More than 90 per cent of the companies that had used but not repaid money from the government’s coronavirus job retention scheme awarded no bonus, Deloitte found. That was also the case with companies that suffered significant share price falls, with four-fifths that had a drop of more than a fifth paying no bonus.

Stephen Cahill, vice-chairman at Deloitte, said: “We are seeing remuneration committees more actively use judgment and discretion to ensure that executive pay reflects the wider employee and shareholder experience.”

Mr Cahill said boards would be more careful after many executives were seen to have avoided a hit from the 2008 global financial crisis. “Now, with a growing focus on societal fairness, boards are more aware of the need to show restraint,” he said. “Shareholders have been very clear on their expectations.”

Boards also need to make decisions over future pay awards, including long-term incentives, with about a quarter of companies due a three-year review of their pay.

Sacha Sadan, director of investment stewardship at LGIM, said: “In general, companies have been responsible.”

But he warned that pay was “absolutely a big issue” for the coming annual meetings season, particularly on long-term incentive plans. 

He added that some companies had complained that their long-term bonuses awards “aren’t paying out” as hoped because of the pandemic, but he warned that shareholders would not look kindly on businesses resetting these to try to boost overall remuneration packages. 

The initial round of company reports also showed the clear bifurcation between companies that prospered in the pandemic — such as online retail and services — and those that suffered particularly badly in traditional retail, hospitality and property.

Mr Cahill said executives at companies that had fared well, with soaring share prices and bumper profits, would probably see high bonuses this year.

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