Median CEO pay in 2022 was 118 times that of the median full-time worker in the UK, analysis by the High Pay Centre has found.
On average, FTSE 100 CEOs were paid £3.91 million in 2022 – the highest this figure has been since 2017, and an increase of 16% on the median FTSE 100 CEO pay in 2021.
The gap between median FTSE 100 CEO pay and median full-time employee pay (£33,000) is the widest it has been since 2018. This is despite median full-time employee pay rising 5.5% from £31,285 in 2021.
The economic inequality think tank analysed FTSE 100 and FTSE 250 companies’ annual reports for their financial year ending in 2022.
Its Analysis of UK CEO pay in 2022 report noted that listed companies may have been experiencing a “post-Covid bounce”, as 2022 was the first year after the pandemic without a lockdown. However, it also recognised that costs might have increased as the war in Ukraine had begun and inflation ended the year at 10.5%, having hit a record high of 11.1% in October.
The report says: “This economic backdrop inevitably means that large pay awards made to multi-millionaire executives are likely to be politically sensitive. Concerns about economic inequality ensure that the gap between top executives and the wider workforce is closely scrutinised.
“Many critics argue that CEO pay practices at major UK employers, where the millions of pounds lavished on a handful of top managers represent a cost equivalent to funding life-changing payments for thousands of lower-paid workers, illustrate the damaging impact that our business culture and governance model has on living standards.“
It says that awarding CEOs bumper pay packets while many workers endured hardship brought on by the cost-of-living crisis has the potential to be a major reputational issue.
“Polling for the High Pay Centre last year found that 63% of people think that CEOs should not be paid more than
ten times their low- and mid-level employees. Excessive top pay, and poor pay and conditions for lower paid workers were given as two of the top three reasons for lack of trust in business, which has now reached a point where more people think business has a generally negative impact on society than a positive one,” the report says.
Earlier this year chief executive of the London Stock Exchange Julia Hoggett claimed UK CEOs are not well-paid by international standards, and that this may affect top companies’ ability to attract capable business leaders.
In 2022, AstraZeneca’s CEO Pascal Soriot was the highest-paid FTSE executive, earning £15.32 million. Other CEOs receiving bumper pay packets included BAE Systems’ Charles Woodburn (£10.96 million), CRH’s Albert Manifold (£10.38 million), and BP’s Bernard Looney (£10.03 million).
Ninety-six per cent of FTSE 100 companies paid their CEO an annual bonus, up from 87% in 2021, while 74% paid a long-term incentive (LTI), compared with 71% in 2021.
The average bonus fell slightly from £1.43 million to £1.41 million, but the average LTI payment increased from £1.50 million to £1.79 million.
FTSE 350 firms paid a total of £1.33bn to 570 executives.
The report makes several recommendations for boosting public confidence in the pay-setting process, including:
- introducing a requirement for all UK-listed companies to include a minimum of two elected workforce representatives on their remuneration committees, to inject “real world” perspectives into the process
- giving unions the legal right to access workplaces to tell workers about the benefits of union membership and collective bargaining
- requiring companies to provide more detail about their highest and lowest-paid workers. Currently, FTSE organisations are only required to publish their CEO pay and the ratio between the CEO and employees at the 75th, 50th and 25th percentiles
- establishing new bodies for unions and employers to negotiate across sectors
- phasing out LTI payments, in line with the Conservative party’s 2019 manifesto commitment to “‘improve incentives to attack the problem of excessive executive pay and rewards for failure”.
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