Although CEOs' median salary increased by a modest 3-4%, bonus payments account for 31% of FTSE 100 chief executive earnings and 33% for FTSE 250 chief executives.
The high proportion of bonus payments show companies are not adequately aligning CEO remuneration with performance, says David Ellis, the head of KPMG’s remuneration practice.
“From a shareholder perspective, and without further explanation, this may lead to a conclusion that some annual bonus payments were not justified,” he said.
“Many companies only disclose performance measures at a very high level. This is one of the areas where we expect to see a particular focus in 2014 now that new disclosure requirements have come in.”
KPMG’s Guide to Directors’ Remuneration 2013 found one third of companies paid their CEO a bonus of 80% of the maximum value. Only 10% of FTSE 100 and 7% of FTSE 250 CEOs did not receive a bonus this year.
However, new transparency rules on directors’ remuneration means shareholders will have a binding vote on a forward-looking remuneration policy and an advisory vote on how the policy has been implemented. This applies to financial year-ends starting on or after 1 October 2013, and should place greater focus on linking CEO pay to performance.
