Bonus hikes to offset bosses' modest raises

There will be few eyebrow-raising increases in executive salaries this year, as companies bow to shareholder pressure, but controversial bonuses for bosses will continue, according to PricewaterhouseCoopers.

Salary increases for senior staff will remain modest at 3 per cent, half the 6 per cent levels achieved in 2007 and 2008, the accountants predict in a survey published today.

But bonuses could soar at almost a third of firms, forced to sweeten packages for executives unhappy about effective pay freezes.

The company surveyed senior reward professionals ahead of the AGM season, when executive pay will once again come under the spotlight.

"Shareholder activism on pay has stepped up substantially over the last few years and seems to be having an effect," said Sean O'Hare, reward partner at PwC.

"It looks like 2011 will be the third consecutive year of pay rise restraint, with increases lower or in line with national average earnings after years of rising much faster," he said.

"The difficulty for remuneration committees will be managing executives' expectations, which are rising again post recession."

Around 30 per cent of companies are planning to increase the maximum potential bonus for chief executives.

Last year the median maximum potential bonus for FTSE chief executives (CEOs) climbed for the first time in three years, from 150 per cent to 175 per cent of base salary.

Actual bonus payments also increased substantially in 2010, PwC says. The median actual bonus payment for a FTSE CEO was 111 per cent of base salary, almost 30 per cent higher than the previous year.