Almost half of executives will see no salary increase this year; some larger businesses beginning to publish pay ratios

The pay packets of CEOs and other senior executives in Britain’s biggest companies are falling for the first time in recent history, says a new analysis, as shareholder activism and political pressure over high pay begin to impact remuneration decisions.

PwC’s report found that median total pay for CEOs in FTSE 100 companies fell from £4.3m to £4.1m this year among those businesses that had issued updated remuneration reports.

Where CEO salaries increased, said PwC, they did so in line with increases for other employees. Total pay among the upper quartile of CEOs fell by 13 per cent from £6.6m to £5.7m.

There was also an increased focus on fairness in pay policies, with four of the 40 companies covered by the report disclosing a CEO-to-average-employee ratio. BAE Systems, for example, put its ratio at 52:1, up from 47:1 in the previous year despite its CEO’s pay remaining static at £982,300.

However, there seems to be little appetite for major structural change to remuneration policies: although 63 per cent of the companies surveyed were planning new policies, long-term incentive plans remained the bedrock of their executive reward.

“Executive pay may be moderating,” said Charles Cotton, performance and reward adviser at the CIPD. “It suggests businesses are shying away from having bust-ups over pay with their shareholders.”

This will be broadly welcomed, added Cotton, as most commentators believe current levels of pay and incentives are not fit for purpose: “Employers should recognise that corporate achievement is rarely due to the efforts of one individual at the top of the organisational pyramid. To be successful, our economy has to get better at recognising the contributions of all employees in achieving business goals and sharing the proceeds of success among them.”

Executive pay has been a simmering issue for years, but has gained an enhanced profile in the past year after prime minister Theresa May used her inaugural speech to claim the Brexit vote was partly a public protest against corporate bosses who “don’t get it.”

This month, a report from the Business, Energy and Industrial Strategy (BEIS) Committee said businesses needed to improve corporate governance, address excessive executive pay and improve boardroom diversity to restore public trust.

It highlighted the damage caused by high-profile failings at Sports Direct and BHS, together with a “ratcheting up” of executive pay in recent years, despite stagnant wage growth for many workers, and suggested employees should sit on remuneration committees.

Shareholders have also felt increasingly empowered to curb top pay. More than 4,000 listed British companies will report on pay over the next few weeks, and two thirds of them will be voting on a binding remuneration policy to guide pay decisions, making this year’s round of votes on remuneration reports particularly tense.

Tom Gosling, head of reward at PwC, said: “Companies are under the most intense scrutiny ever on pay decisions, and it's no surprise they are generally showing restraint. This reflects continued shareholder pressure on companies perceived to be outliers on pay.”

The first shoots of revolt are already being seen at AGMs. In late March, Reckitt Benckiser – one of the most generous businesses in the FTSE 100 for senior executives – cut CEO Rakesh Kapoor’s package by around £14m, withholding his bonus and trimming a long-term incentive plan after almost one in five shareholders voted against its pay policy.

BP’s Bob Dudley saw 59 per cent of shareholders oppose a salary and benefits package worth around £15m. They were unhappy his pay had increased 20 per cent in a year of underperformance; the company agreed to a 40 per cent cut.