Trend for scrutiny of senior level reward increases

Financial Conduct Authority (FCA) boss, Martin Wheatley, is understood to have agreed to defer his bonus until an inquiry into a leaked press briefing has come to its conclusion.

The leak in March – which revealed the FCA would be investigating the sale of millions of investment policies, ranging from pensions, investment bonds and life assurance – broke rules that announcements like this should be given to the press and investors simultaneously.

The gaffe triggered day-long investor panic, leading to billions of pounds being wiped off the value of firms including Aviva, Friends Life, and Legal and General.

It took the FCA more than six hours to issue a clarifying statement, about the terms of the review, causing Commons Treasury Committee chair, Andrew Tyrie, to describe the event as an ‘extraordinary blunder’.

The decision means Wheatley and eight other colleagues on the executive committee will waive all discretionary payments until the outcome of the inquiry is made. Last year Wheatley received £86,000 in bonuses.

It’s not the first time this year that bonuses have had to be reigned back to ward off a backlash. This week 30 per cent of shareholders at advertising giant WPP rejected boss Sir Martin Sorrell’s ‘excessive’ future pay policy, which means that while his salary is £1.15 million, variable elements increase it by 1,400 per cent (making it nearly £20m).

The Local Authority Pension Fund Forum – representing public sector pensions – voted against WPP's future pay policy, describing it as a “complex salary and bonus package not justified by performance and out of step with shareholder and community expectations”.

It’s not the first time WPP has faced criticism for its pay decisions. Nearly 60 per cent of shareholders rejected its remuneration report in 2012, while 28 per cent of shareholders rejected or abstained in a vote on the 2013 plan.

Also this week, the chairman of Royal Bank of Scotland Sir Philip Hampton, was forced to defend the bank’s bonus schemes, admitting: “Pay in the financial sector, particularly banks, got out of line with other sectors and more importantly the underlying performance of the business.” Last year the bank made a loss of £8.2 billion and said bonuses were down 60 per cent in the last four years.

In May HSBC backtracked on a planned £2.25 million bonus for its chairman Douglas Flint. After the chair of the remuneration committee met angry shareholders ahead of its AGM, the bonus was reduced to a one-off £1.06 million to reflect his increased regulatory workload.

In April, investors rejected a proposal to award Sports Direct founder Mike Ashley free shares worth £72 million.