Today (4 January) the average FTSE 100 CEO will already have earned more in 2018 than the typical full-time worker will earn in an entire year, according to the CIPD and think tank the High Pay Centre.
They have calculated that top executives’ pay would have surpassed the median UK gross annual salary of £28,758 for full-time employees by the end of the third working day of 2018.
Despite the average FTSE 100 CEO salary falling by a fifth from £5.4m to £4.5m year-on-year, the ratio of CEO pay to the pay of the average full-time employee remained at 120:1.
|Sir Martin Sorrell||WPP||£48.1m|
|Rakesh Kapoor||Reckitt Benckiser||£14.6m|
|Ben van Beurden||Royal Dutch Shell||£6.9m|
Peter Cheese, chief executive of the CIPD, welcomed the drop in CEO pay and said it was important that the government kept high pay and corporate governance reform high on its agenda.
He said: “We also need business, shareholders and remuneration committees to do their part and challenge excessive pay, to understand pay and reward for top executives in the context of the whole organisation, and look at how pay is linked to driving sustainable performance.
“We need a significant rethink on how and why we reward CEOs, taking into account a much more balanced scorecard of success beyond financial outcomes, looking more widely at the impacts of businesses on all stakeholders from employees to society more broadly.”
Stefan Stern, director of the High Pay Centre, said: “While it was encouraging to see a tiny amount of restraint on pay at the top of some FTSE 100 companies last year, there are still grossly excessive and unjustifiable gaps between the top and the rest of the workforce.
“Publishing pay ratios will force boards to acknowledge these gaps. We look forward to working with business and government to make this new disclosure requirement work as effectively as possible.”
Charles Cotton, senior reward and performance adviser at the CIPD, said: “When considering executive and employee pay, reward decisions must be principles-led, evidence-based and outcome-driven. It should be aligned to financial and non-financial measures of business success, reflecting both short and long-term performance.
“Executive pay should also be considered alongside how the wider workforce is being rewarded. In a year when real earnings will have fallen for many, excessive reward at the top will be strongly felt by the rest of the workforce.”
Previous CIPD research has suggested that the excessive pay of some top executives had a damaging effect on the UK workforce. In 2015, a survey of 1,000 workers found that 60% agreed that executive pay levels in the UK demotivated workers.
The High Pay Centre and the CIPD are hoping that the government’s review of corporate governance will address the issue of high pay.