By Max Clarke

Pay for top executives across the majority of FTSE 350 companies looks set to rise in 2012, according to a survey.

Pay increases are most likely to be to base salaries, professional services firm, PwC explain. Of those firms expecting executive pay to rise, 65% will increase base salaries only, while a further 30% will lift salaries along with other components, such as long-term incentives. Salary increases are expected to be between 2-4%, broadly in line with 2011 rates.

"Even moderate pay increases in line with inflation are likely to prove controversial given the building public and political pressure to address the widening gulf between the highest and lowest earners, compounded by tough economic conditions,” said Sean O’Hare, reward partner at PwC. “But whether anticipated salary rises play out next year will depend on whether markets improve. Increases that are not aligned to company and share price performance are likely to meet strong resistance from shareholders."

Bonus payouts in particular will depend on whether executives meet performance targets, which are likely to become more stretching. PwC data shows that bonus performance metrics are focusing more on company revenues, profits and strategy.

"One of the biggest causes of shareholder concern has been bonuses paying out even when company performance has been disappointing, as was sometimes the case in 2010,” continued O’Hare. “Toughening up executives’ targets and ensuring they reflect business strategy has become a major focus."

Shareholders may also be reassured by measures that could see companies reclaiming chunks of executives’ pay in certain situations. A significant 30% of firms are planning to introduce so-called clawback in 2012. Most of these firms say clawback would take the form of reducing outstanding deferred shares or other long-term incentives.


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