Whether you call it compensation or remuneration, how — and how much — executives get paid is a lightning rod for companies and investors around the world. The 2024 proxy season even saw questions raised about the impact of local pay norms on broader market competitiveness. While shareholder voting patterns varied by region, there were some universal trends, including the growing ubiquity of non-financial metrics — and a continuing uptick in total pay levels.

Executive Pay Quantum

While the size and prevalence of increases varied from market to market, aggregate CEO fixed pay was consistently up across Continental Europe

• Among blue-chips, the prevalence of CEO salary increases ranged from approximately 15% of companies in Italy, to 77% of companies in the Nordic markets. The size of these pay increases also varied substantially; while only one in five French blue-chip companies increased CEO salary this year, almost half of these increases were 30% or higher.
• In the UK, salary increases were marginally higher this season, with an average increase of 4.6% in the FTSE 350 (prior year: 3.7%) and continue to be outpaced by percentage increases to the wider workforce (6.3%). Total CEO remuneration increased by around 10% on average, reflecting an increase in bonus payouts (130.6% of base salary, up from 117.1% in 2023).

Even as the wave of ‘mega-grants’ continued to subside, U.S. median CEO pay went up, with the largest companies seeing the largest increases: 6.2% in S&P 500, vs 3.3% across the Russell 3000

• For the 2024 proxy season, Broadcom Inc. recorded the highest CEO compensation value, inflated by a mega-grant that at fiscal year-end was valued by the company at $558,906,946.
• Yet even including Broadcom’s award, the average value of one-time awards was smaller in 2024 than in proxy season 2023.

Average total pay was up significantly in Canada, with S&P/TSX 60 CEOs receiving 16% more than last year

• The median total CEO pay for the S&P/TSX 60 in 2024 was C$11,526,629.
• Of the six S&P/TSX 60 companies that neglected to hold a vote this proxy season, four have a multi-class share structure.

Shareholder Voting

Responsiveness to investors was a problem across North America — but overall U.S. shareholder opposition to say-on-pay proposals declined, particularly at larger companies

• 37 proposals failed to receive majority support, an approximate 41% decrease from 63 in 2023.  This trend was particularly pronounced among the largest companies, as the number of failed S&P 500 say-on-pays fell dramatically to its lowest level since the pandemic, from 11 in 2023 to 4 in 2024.
  • Having fewer excessively generous one-time awards (see above) likely contributed to the decline.
  • Pay-for-performance misalignment was a common feature of companies that received high opposition. Notably, Glass Lewis observed an insufficient response to shareholder dissent among these same companies.
  • Among the four failed proposals from S&P 500 companies, two showcased concerns around controversial non-GAAP adjustments to incentive plan performance results (3M and Norfolk Southern); excessive pay practices were seen at three of the four (Zebra Technologies, Salesforce, and Norfolk Southern).

In our Canadian coverage, three say-on-pay proposals failed to receive majority support, at Enerflex Ltd.; Aimia Inc.; and First Majestic Silver Corp

• Notably, Aimia and First Majestic represent two of the three companies that had failed say-on-pay proposals last year.

Almost all large UK and Europe companies received sufficient support for their remuneration proposals — but many just scraped by

• Among blue-chip companies in Continental Europe, there was one (retrospective) remuneration report proposals, at Dutch semiconductor manufacturer BESI, and one (prospective) remuneration policy proposal, at German real estate company Vonovia, that failed to gain majority support.
• In the UK FTSE 350, the remuneration report at fintech firm Plus500 was the only pay proposal that failed to be approved.
  • This was the third consecutive year of majority shareholder opposition for both BESI and Plus500.
• Many other remuneration proposals in the UK and Europe received substantial dissent, often in relation to salary or total opportunity increases and/or poor response to investor concerns. Many of these will feature in our extended Season Reviews.

In Australia’s most recent proxy season, shareholder dissent on pay increased significantly, with an unprecedented 41 remuneration strikes among S&P/ASX300 companies

• A persistent theme was the perceived preferential treatment of executives (e.g. via payout levels, exercise of upward discretion, and provision of retention awards), particularly in the context of poor shareholder returns.
• Investors also took issue with poorly designed, underdeveloped, or discretionary remuneration structures, and incentives that failed to meaningfully reflect factors such as potential reputational damage and safety/fatalities.

ESG Metrics in Incentive Plans

A supermajority of the largest companies in Europe and North America now consider ESG performance in at least one incentive program

• Europe leads global markets and continues to see an increase in inclusion of ESG metrics in incentive plans. 92% of all European blue-chip companies included such metrics this year, compared to 89% last year, and some markets are already at 100% of blue-chip companies. The clear laggard in this trend is Sweden (60%).
• In the U.S., 71.4% of the S&P 500 Index included ESG considerations, up from 69.1% in 2023. There was a healthy 4.6 percentage point increase in the wider U.S. market as well, with 43.3% of all companies assessing ESG performance for incentive program payouts.
• A significant majority (81%) of Canadian companies that held a Say-on-Pay vote in 2024 had ESG metrics in their incentive plans.

Transatlantic Pay Gap

The perceived gap with U.S. companies has drawn particular attention in the UK, where concerns have been raised about executive pay affecting the market’s competitiveness as a listing location

• Among FTSE 350 companies that held a policy vote this year, one in ten have proposed a U.S. style ‘hybrid’ incentive plan where a portion of the awards vest solely on time served, and three in ten have proposed to increase the total opportunity under one or both incentive plans.
  • A wide range in voting support on these proposals (ranging from 56.8% to 99.9%), indicates that shareholders are open to considering higher bonus opportunity or retention-focused awards, but will oppose proposals absent a compelling rationale.
• The UK Investment Association is currently reviewing its Principles of Remuneration “to ensure that they are supporting a competitive market.”

Link to full article can be found here.