‘Fat Cat Friday’ as FTSE 100 CEOs pocket average worker’s annual pay
Just three working days into 2019, the typical FTSE 100 chief executive has already been paid what it will take the average UK employee the rest of the year to earn, according to the High Pay Centre and the CIPD
4 Jan 2019
The median annual salary of the average full-time worker in the UK stands at £29,574 so with the median average salary of a FTSE 100 CEO being £3.9m, bosses at the top companies only need to work until 1pm on 4 January 2019 to earn the same amount.
The £3.9m figure was calculated by the CIPD and the High Pay Centre in their 2018 analysis of top pay and shows an 11% increase on the £3.5m figure reported in 2017.
The pay increase means that FTSE 100 CEOs, working an average 12-hour day, will only need to work for 29 hours in 2019 to earn the average worker’s annual salary, two hours fewer than in 2018.
Peter Cheese, chief executive of the CIPD, said: ‘There is still far too great a gap between top earners and the rest of the workforce. Average pay has stagnated whilst top CEO reward has grown, despite overall slow economic growth and very variable business performance. Excessive pay packages awarded by remuneration committees represent a significant failure in corporate governance and perpetuate the idea of a ‘superstar’ business leader when business is a collective endeavour and reward should be shared more fairly.
‘Stakeholders of all kinds, including many shareholders, are looking for significant shifts in corporate cultures and behaviours. Evolving the remuneration committee to become a broader people and culture committee would help boards focus on and gain deeper understanding of the organisational, cultural, and people aspects of their business, and the opportunities and risks they pose.’
The CIPD and High Pay Centre have published a report, RemCo reform: Governing successful organisations that benefit everyone, which highlights the shortcomings of remuneration committees (RemCos) and calls for reform.
The report calls for greater diversity in remuneration committees in terms of gender and ethnicity as well as professional backgrounds and expertise. It also highlights how current mechanisms contribute to the problem of high pay recommending that long-term incentive plans as the default model for executive remuneration should be replaced with a less complex system based on a basic salary and a much smaller restricted share award. This would simplify the process of setting executive pay and ensure that pay is more closely aligned to executive performance.
Luke Hildyard, director of the High Pay Centre, said: ‘Excessive executive pay represents a massive corporate governance failure and is a barrier to a fairer economy. Corporate boards are too willing to spend millions on top executives without any real justification, while the wider workforce is treated as a cost to be minimised.
‘To raise living standards, we need growth and innovation, but also to ensure that growth is fairly distributed. CEO pay packages 133 times the size of the average UK worker suggest we could do a lot better in this respect.’
As part of new executive pay regulations, from 1 January 2019 the UK’s biggest companies are required to disclose and explain the gap between the pay received by senior executives and that of the average worker. Companies will have to provide the ratio of their CEO’s pay to that of the median, lower quartile and upper quartile pay of their UK employees
Report by Amy Austin