Sunday, August 9, 2020

FTSE 100 CEO’s average salaries drop by 17% in the last year

An annual assessment of FTSE 100 CEO pay packages released today shows that rewards at the top have dropped by almost a fifth, but still remain extraordinarily high.

The analysis, from the CIPD, the professional body for HR and people development, and the High Pay Centre, the independent think tank, shows that the average FTSE 100 CEO now receives an annual pay package of £4.5 million. This represents a 17% drop from £5.4 million in 2015. While this may represent a significant drop in CEO pay packages, it would still take the average UK full-time worker on a salary of £28,000 (median full-time earnings) 160 years to earn what an average FTSE 100 CEO is paid in just one year and 1,718 years to earn what Sir Martin Sorrell, CEO of WPP, received last year alone (£48.1 million).

Key highlights from the CIPD and High Pay Centre’s analysis include:

  • In 2016, the pay ratio between FTSE 100 CEOs and the average pay package of their employees was 129:1 – so for every £1 the average employee is paid, their CEO receives £129. In 2015, the ratio was 148:1.
  • 60 of the FTSE 100 CEOs are paid more than 100 times the typical annual pay of a UK worker which currently stands at £28,000 per year (mean earnings).
  • In contrast to the generous pay packages awarded at the higher levels, just over a quarter of the FTSE 100 are accredited by the Living Wage Foundation for paying the voluntary living wage to all their UK-based staff.
  • There are just six female FTSE 100 CEOs. While women make up 6% of the FTSE 100, they earn just 4% of the total pay. Male CEOs in the FTSE 100 earned on average £4.7 million last year, compared with £2.6 million on average for women.

Peter Cheese, Chief Executive of the CIPD, says: “We have to hope that the reversal in rising executive pay is the beginning of a re-think on how CEOs are rewarded, rather than a short-term reaction to political pressure. The fall in executive pay is a step in the right direction, but it’s still happening within an overall reward system where average wages in the UK have been flat. 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.

“Rather than focusing predominantly on share price or short term profit, we need a much more balanced scorecard for performance that also takes account of other indicators of success such as investment in people, social responsibility and accountability, and long-term value creation. High pay must be addressed as part of the much broader review of UK corporate governance.”

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. This is welcome, but the response has been limited and very late. It is also, so far, a one-off. We need to see continued efforts to restrain and reverse excess at the top. And we should beware the ratcheting up of pay lower down the FTSE league table as CEOs and remuneration committees ‘chase the median’. This helps nobody but a few lucky top execs”.

Business Minister Margot James said: “It remains this government’s firm commitment to build an economy that works for everyone, making Britain one of the best places in the world to work, invest and do business.

“We have been very clear that to achieve this ambition businesses should be run responsibly, including ensuring executive pay is properly aligned to performance as outlined in the Corporate Governance Reform green paper.

“This report shows encouraging signs that the UK’s largest firms are already making progress in this area and our responsible business reforms, which we will publish shortly, will help to enhance the public’s trust and confidence in big business.”

 

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