Pay for FTSE 100 chief executives bounced back to pre-pandemic levels after increasing by a third in 2021, as some sectors experienced a post-Covid boom and companies measured performance against conservative targets.

An analysis by PwC of the first 50 FTSE 100 companies to publish their 2021 remuneration reports — based on financial years ending on or after September 2021 — found that median total remuneration for chief executives increased 34 per cent from 2020, to £4.1mn. Growth was predominantly driven by a big increase in annual bonuses.

This marked a return to the levels last seen before Covid-19 — the median total remuneration for FTSE 100 chief executives reached £4.2mn in 2019. The average 2021 executive bonus was 82 per cent of the maximum payout, way ahead of 44 per cent in 2020 and 66 per cent in 2019.

Phillippa O’Connor, reward and employment leader at PwC UK, said: “We have seen a post-Covid boom in some sectors, such as banks, wider financial services and the construction industry, which will be reflected in executive pay decisions.”

Other sectors such as travel, hospitality and retail — among the worst hit by the pandemic — have not recovered to the same degree.

“When companies were setting their bonus plans at the start of 2021, the expectation of the Covid drag factor and uncertainty created a more pessimistic view than turned out to be the case,” O’Connor said.

PwC’s analysis comes amid an AGM season in which both the quantum and structure of executive remuneration will continue to be under scrutiny from investors. Like last year they are trying to ensure that companies that have taken furlough money or cut dividends do not pay bonuses.

The meetings are taking place against a deteriorating global economic backdrop, as Russia’s invasion of Ukraine imposes a severe stagflationary shock and the return of Covid to China once again threatens global supply chains.

Many more companies are now linking environmental, social or corporate governance criteria to variable pay policies. PwC’s analysis found that 86 per cent of companies are using ESG measures for 2022 plans, up from 64 per cent in 2021.

This reflects overall pressure from investors. Allianz Global Investors, one of Europe’s largest asset managers, and activist Cevian Capital have said they will vote against large UK and European companies they have invested in if they fail to link executive pay to climate targets. They are urging other investors to follow suit.

O’Connor said aligning executive pay to climate targets made sense because it forced companies to disclose their journey to net zero — not just the end point — and meant that executives were held accountable for progress on their watch.

The one area of variable pay where the pandemic continues to drag is on long-term incentive plans. PwC found there was an average outcome of 46 per cent of the maximum available in 2021, compared with 67 per cent pre-Covid.

Only 17 per cent of FTSE 100 chief executives have had their salary frozen for 2022, compared with 47 per cent in 2021.

O’Connor said “the bounce back in bonuses may mean that shareholders place greater scrutiny of targets set in 2022 as a result”.