The pressure on boards over executive pay was renewed yesterday when the day was declared “Fat Cat Thursday” by the UK’s High Pay Centre, the day when the average pay of a FTSE 100 chief executive reaches the same level that an average worker will receive for the whole year.
The centre’s online tracker shows that it takes just three days for the mean annual salary of a CEO to rack up earnings equivalent to the median UK gross annual salary of £28,758 for a full-time employee.
The tracker reached the landmark level after a year in which average CEO pay fell by a fifth, down from £5.4m to £4.5m. The ratio of CEO pay to the average full-time worker remains at 120:1.
Stefan Stern, director of the High Pay Centre, said: “While it was encouraging to see a tiny amount of restraint on pay at the top of some FTSE 100 companies last year, there are still grossly excessive and unjustifiable gaps between the top and the rest of the workforce.
“Publishing pay ratios will force boards to acknowledge these gaps. We look forward to working with business and government to make this new disclosure requirement work as effectively as possible.”
Unions were much less sympathetic to CEO pay levels and tied the issue to policy over workers on company boards. Tim Roache, general secretary of the GMB, said: “Despite promises to tackle executive pay, the bosses of big corporations are still raking in well over a hundred times the average worker’s pay.
“Last year Theresa May broke her pledge to guarantee worker representation on company boards, a move which would have helped shed light on corporate excess and redress the balance towards fairer pay.
“It’s simply obscene that in just three working days, top company bosses will have made more money than the typical UK full-time worker will earn in the entire year.”
Luke Hildyard, stewardship and corporate governance policy lead at the Pensions and Lifetime Savings Association (PLSA), said that big pay differences “symbolise” how “too many companies fail to understand or appreciate the value of their workers”.
He said that only 7% of FTSE 100 companies report the ratio between CEO and employee pay, and only 21% report what they are doing to invest in training and staff development.
Hildyard said: “Pension scheme investors use information about the employment models and working practices of the companies they invest in, including the pay gap between the top executives and the rest of the workforce, as indicators of the corporate culture.”
He added: “As long-term investors, pension funds think that boards should be more sceptical about the need for vast executive pay awards and focus on explaining how they are fostering innovation, improving productivity and developing a positive employment culture throughout their organisations.”