Pressure to secure global talent has prompted a shift in how UK companies approach executive pay, with boards taking a firmer stance on raising compensation for chief executives.

Commenting for the Financial Times, Dame Julia Hoggett, the chief executive of the London Stock Exchange, who said UK firms now argue more forcefully for packages they believe are necessary to stay competitive.

[#highlighted-links#]

Hoggett said remuneration committees have become “far more forceful” when defending the need for competitive pay packages. She described a notable change over the past few years as UK firms reposition themselves against US and Asian rivals.

UK CEO Pay Rises Faster Than in the US

New data from Institutional Shareholder Services reflects this change. Median pay for FTSE 100 chief executives rose 11% in the last financial year to $6.5 million. By contrast, the median pay for US CEOs grew 7.5%. However, the gap remains significant, with US chief executives earning a median of $16 million.

The UK’s corporate governance rules require companies to engage with investors if support for resolutions—such as executive pay increases—falls below 80%.

Hoggett argued that this rule has unintentionally created a “naughty step”, where companies fear appearing out of line even when rising pay is justified. The issue, she noted, is about ensuring UK companies can compete “in the war for talent” and maintain strong leadership.

Capital Markets Under Pressure

The LSE’s own experience shows the tension. In May, 30% of shareholders opposed the planned £7.8 million pay package for LSEG CEO David Schwimmer, a level of dissent significant enough to trigger required engagement under governance guidelines.

Her comments come as global exchanges face declining numbers of public listings. London’s IPO market hit a 30-year low in the first half of the year, with only five companies raising £160 million. Several UK firms have shifted their listing plans to the US, raising concerns about London’s long-term competitiveness.

The UK government has sought to bolster the market. Chancellor Rachel Reeves used the latest Budget to introduce a three-year stamp duty holiday on shares for new London listings, aiming to revive activity in the public markets.

Expect ongoing updates as this story evolves.

Source: Finance Magnates