When chief executives of companies in the FTSE 100 go into the office this morning they will on average have already earned in 2020 what a typical full time employee will earn in the whole of the year, according to a new study.
The report by the Chartered Institute of Personnel and Development (CIPD) and the High Pay Centre think tank says the average FTSE 100 boss was paid £3.46m in 2018, or £901.30 an hour – 117 times the average UK annual wage of £29,559.
The issue of executive pay will be under more scrutiny than ever in 2020 because for the first time publicly listed firms with more than 250 UK employees must disclose the ratio between chief executive pay and that of their average worker, and explain the reasons for their executive pay ratios.
The CIPD and High Pay Centre called on businesses not to treat the new reporting requirements as a “tick-box” exercise and to use it as an opportunity to fully explain chief executive pay levels.
Peter Cheese, chief executive at the CIPD, said: “This is the first year where businesses are really being held to account on executive pay. Pay ratio reporting will rightly increase scrutiny on pay and reward practices, but reporting the numbers is just the start.
“We need businesses to step up and justify very high levels of pay for top executives, particularly in relation to how the rest of the workforce is being rewarded.
“Greater fairness and openness in pay is essential in building trust, amongst employees as well as external stakeholders and investors.”
Business Secretary Andrea Leadsom said: “Today’s figures will be eye-watering for the vast majority of hard-working people across the UK.
“The numbers are better than they were – down a quarter since 2012 and 13% on average since last year – but the situation is still concerning, especially in those cases where executives have been rewarded despite failing their employees and customers.
“Our world-leading legislation shines a light on excessive pay and forces companies to disclose and explain the pay of their CEOs, with new reforms this year to increase transparency around how directors meet their responsibilities and future plans to ensure companies cannot shy away from required reporting on executive pay.”
TUC General Secretary Frances O’Grady said: “This tells you everything about how unfair our economy is. Every working person plays a part in creating Britain’s wealth, but people at the top are taking more than their share.
“We need a real plan from the government to tackle excessive pay. Reporting on it is only the start, there should be seats for workers on pay committees and company boards to stop fat cats taking more than their fair share.”
But the director general at the Institute of Economic Affairs, Mark Littlewood, said: “Comparing CEO salaries to the average salary serves to stoke public hostility, and misleads workers to believe that cuts at the top end will directly translate to top-ups at the bottom.”
He added: “By continuing our obsession with high pay, we dismiss the achievements of successful CEOs which benefit employees and customers alike; and we distract ourselves from tackling the critical issue of low pay and the cost of living crisis.”
