Bosses’ fall in pay ‘limited and late’

  • 3 August 2017
  • From the section Business

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Top chief executives’ pay has fallen in the past year, but there is still “a huge gap” between them and the rest of their staff, a report has said.

The bosses of FTSE 100 companies now make on average £4.5m a year, down 17% from £5.4m in 2015, according to the High Pay Centre’s research.

The think tank said the fall was welcome but “limited and very late”.

It would take the average UK full-time worker on a salary of £28,000 160 years to earn the same amount, it added.

Stefan Stern, director of the High Pay Centre, said: “We have finally seen a fall in executive pay this year, in the context of political pressure and in the spotlight of hostile public opinion.”

However, he added it was “so far, a one-off”.

“We need to see continued efforts to restrain and reverse excess at the top.”

The report said the pay ratio between FTSE 100 bosses and the average pay package of their employees had also fallen to 129:1 – meaning that for every £1 the average employee is paid, their chief executive gets £129.

In 2015 the ratio was 148:1.

Gender pay disparity

The study also found that, “in contrast to the generous pay packages awarded at the higher levels”, just over a quarter of top companies signed up to the voluntary living wage which commits them to a higher pay level than the minimum wage set by the government.

The research, which was carried out in conjunction with the Chartered Institute of Personnel and Development (CIPD), also showed there were just six women in the top 100 chief executives, and they were paid on average £2.6m last year.

CIPD chief executive Peter Cheese said “Our analysis also shows a clear gender pay disparity at the top, with female CEOs receiving less than their male peers.”

“Quite rightly this issue of fairness is increasingly being called out and this needs to be addressed at all levels of businesses.”

The report said one explanation for the fall in top bosses’ pay was that “it has become hard for organisations to justify further growth in [chief executive] pay while the wage progression for the typical British worker has been so subdued”.

Another was that politicians had become more interested in executive pay, with Theresa May criticising the “growing gap between rewards for those at the top and those who were just about managing”.

‘Not a threat’

However, the report questioned whether the government would now “devote it’s all its energy on Brexit”?

“Our concern is that if the government vacates this space [chief executive]remuneration will accelerate once more,” it said.

“Therefore we want to see Theresa May stick to her guns and introduce a bill to reform executive pay before the year end.”

But whatever the government does, the report advises firms to adopt the use of pay ratios showing the difference in earnings between the chief executive and average employees.

It said these “should not be seen as a threat or punishment but rather as a mechanism to bring about greater fairness and transparency at work, and avoid the demotivating effects of unjustified wage gaps”.

The employers’ organisation, the CBI, said: “Where pay does not match performance, business leaders can appear detached from society and not committed to fairness.”

“Recent changes in executive pay growth show the vast majority of firms have taken this message on board.”

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