FTSE 100 bosses earn 117 times average worker
CIPD says gap between executives and workers is ‘unacceptably wide’
Analysis showing FTSE 100 bosses earn 117 times the average UK worker has prompted calls to rein in executive pay.
A report compiled by the Chartered Institute of Personnel and Development (CIPD), the professional body for human resources, and the High Pay Centre think tank calculated that a boss of one of the UK's largest listed 100 companies earns £3.46m a year on average, compared to £29,574 for the average full-time worker in the UK.
Jeff Fairburn, chief executive of house builder Persimmon, was the highest paid FTSE 100 boss last year, with a package worth a total of £38.9m; 956 times the annual pay of the average Persimmon employee.
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Fairburn’s pay, which was boosted by awards from a long-term incentive plan, “was the subject of controversy last year and he was ousted in November as a result”, says Yahoo! Finance.
Despite average executive pay actually dropping by 13% last year, CIPD chief executive Peter Cheese said the gap between pay at the top and bottom of firms remained “unacceptably wide”.
“We must question if CEOs are overly focused on financial measures and are being incentivised to keep share prices high rather than focusing on the long-term health of their business,” he said.
The report found shareholder revolts at annual meetings have “little impact” on restraining runaway pay across FTSE 100 companies, with AGMs approving all FTSE 100 company pay policies over the past five years.
“Despite the rhetoric about shareholder dissent, most remuneration packages in 2018 were voted through with levels of support of 90% or more,” it said.
Instead, the CIPD and High Pay Centre recommended: pay for the top 1% of earners should be disclosed; wider workforce reward practices; linking chief executive pay to both financial and non-financial measures of performance; and simplifying chief executive reward packages to ensure they are linked to fewer and more meaningful measures of performance.
Measures are already being taken to make big firms pay ratio more transparent, says The Daily Telegraph.
“From 2020, large listed companies will have to report and explain the ‘pay ratio’ of their chief executive to their median employee, and illustrate on how their boards take a full range of stakeholder interests into account,” reports the paper.
HuffPost UK says “the move comes following public and political uproar over recent pay packets for executives at companies such as Persimmon, WPP and BP”.
The BBC adds that “unions were angered by the total pay still being earned by chief executives every year”, with some suggesting a more radical solution.
The GMB Union called it “an absolute scandal” that the average worker would have to work for more than a century to earn the same pay as the chief executive, arguing instead for the need for “a maximum pay ratio enshrined in law to keep our society fair and healthy”.
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