Our review of 2023 and some thoughts about the direction of travel for executive pay in 2024

December 14, 2023


Looking back over the year, our Newsletter has covered a wide range of topics related to remuneration, performance and governance. As far as governance is concerned, it has been a year of false starts, the closing position being somewhere behind the starting point. But progress has been made in other areas.

At the start of the year, the state of the economy was an issue – as it is now. We flagged the staffing challenges faced by private equity firms, many of which are advised by MM&K, as the cost of capital rose and deal flows receded factors which continue to dog the sector. A separate but controversial factor at that time was public perception and the potential impact on pay practices, of the Government’s decision to remove the cap on bankers’ bonuses but the noise surrounding that seems to have subsided.

As the year progressed, we got busy in-house with Life in the Boardroom, our survey of Board Chairs and NEDs, which has been going strong since 1990. One of the many intriguing results from our 2021/22 report was the significant lack of NEDs under the age of 55. We were interested to see if the current situation would show any change. The 2023/24 report has been published and distributed to the 316 individuals who participated. On 7 December, MM&K’s Senior Partner, Paul Norris was invited to discuss the survey outputs in an online interview with Women on Boards CEO, Fiona Hathorn in front of an audience of about 75. It remains the case that 90% of Chairs and 73% of NEDs are over 55. The Life in the Boardroom report is free to participants and can be purchased by non-participants. To obtain a copy, please contact us. A preview of the report can be downloaded here.

ESG is an aspect of governance that has attracted increasing amounts of air time, despite reports of ‘ESG fatigue’. In March, we participated in a webinar hosted by the London Stock Exchange Group on ‘Aligning People, Pay and Planet’, which examined the growth of sustainable performance measures in executive pay and how to keep pace with the direction of travel. The inclusion of ESG metrics in executive incentive plans globally is increasing. Together with our partners in the Global Executive Compensation and Governance Group (GECN)* MM&K produces a detailed annual report on the expanding use of ESG metrics in executive incentives adopted by the world’s largest companies. The latest report is available at no cost. A copy can be obtained here.

Continuing the non-executive theme, earlier this month we were invited to participate in the regular series of podcasts broadcast by Better Boards Limited to discuss the challenges facing remuneration committees and the ways in which remuneration policy can be utilised to tell the company’s story about how pay is linked to culture, strategy and stakeholder expectations. A recording of Paul Norris’ interview with Better Boards founder, Dr Sabine Dembkowski can be found here.

MM&K is an independent firm specialising in advice on executive remuneration, performance and governance.  We have a strong practice advising alternative investment firms and to help support our advisory work in that space, we produce a comprehensive survey of pay policy and practice in the UK and European PE and VC sectors. This year, 50 participating firms provided data on about 2,500 investment and non-investment roles. Alongside the UK and European survey, we also produce, with our US partner, the North American PE and VC Compensation Survey for which this year over 100 participating firms provided data on over 3,500 roles. Information about these surveys can be found here.

Throughout the year, we have identified and sought to help our clients with the challenges that boards and remuneration committees have been grappling with as they seek to achieve their strategic goals, including:

  • the increased demand of institutional shareholders for significant returns
  • the requirement for remuneration committees to deal increasingly with below-the-board remuneration issues and the demands of an increasingly wide range of stakeholder expectations
  • executives’ continuing appetite for higher levels of total remuneration
  • pressure for action particularly on climate and diversity
  • uncertainty about the direction of travel for UK corporate governance.

Voting patterns in the 2023 AGM season reflected the challenges as illustrated in one of our Newsletter articles in October.

It is probably fair to say of 2023 that things have not gone according to plan. Conflict in Ukraine continues and hostilities flare in the middle east. Whilst inflation has fallen and interest rates may have peaked, both remain high relative to recent standards. In addition, there will be a UK general election (probably) next year. The Autumn Statement offered some help to businesses seeking to invest but the level of uncertainty remains high, both at home and abroad. COP 28 has reached agreement on fossil fuels. As with many things, that will bring opportunities for some and challenges for others.

For boards and their remuneration committees, Government u-turns on proposed governance changes, including the creation of ARGA to replace the FRC mean that UK governance is likely to remain broadly as is until after the general election. Executive remuneration policies are likely to focus on award levels, performance metrics and performance measurement periods. There will be pressure on remuneration committees to provide clear disclosure to stakeholders about their proposals (and how they have taken account of stakeholders’ expectations) and the outcomes of the remuneration policies their companies have adopted.

We thank all our clients for your continued support and look forward to building on the relationships we have developed together. As we look forward towards 2024, we wish all our clients, contacts and partners the compliments of the season.

Paul Norris
Director and Senior Partner

* The GECN is an alliance of seven legally independent advisory firms specialising in executive compensation, performance and governance, which pools its considerable resources to serve clients in more than 30 countries through offices in North America, Continental Europe, the United Kingdom, Asia, Australia and Africa.

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