New figures show that FTSE companies are bending to shareholder pressure and moderating executive remuneration.

‘Executive Compensation - Review of the Year 2009’, a study by PricewaterhouseCoopers, has found that median increases in base salary for FTSE 100 and FTSE 250 executives fell to 1% and 0%, respectively, in 2009 and were outstripped by the national average earnings base pay increase (2.5%) for the first time in a decade. In 2008, increases were 6% for both the FTSE 100 and FTSE 250 while the national earnings pay increase was also higher at 3.7%.

Nonetheless, shareholder opposition to remuneration proposals grew, with 20% of FTSE 100 companies seeing more than one in five of their shareholders withhold support for the remuneration report, up from 3%in 2008. The majority of contentious annual meetings arose outside the banking sector.

“Remuneration committees must balance the need to motivate executives against shareholders’ perceptions that the link between pay and performance is not strong enough,” said Tom Gosling, reward partner at PwC. “Shareholder activism on pay increased last year and scrutiny on executive pay arrangements will not diminish this year. The current interactions between shareholders, remuneration committees and executives are leaving all parties frustrated. We need to break the mould of traditional thinking and move to a new model if we want executive pay to work effectively. This means simpler plans, with a greater role for remuneration committee discretion.”