FTSE 350 firms spent more than £1bn on executive pay in 2022, including a rise in average FTSE 100 CEO pay to £3.91m, 16% up on median pay for the top job in the previous year.
The news from the High Pay Centre, a think tank, comes as the UK continues to struggle with a cost-of-living crisis. Interest rates are at record highs, 5.25% from the beginning of August, while consumer prices index (CPI) inflation stands at 6.8%.
The High Pay Centre says its research shows that median CEO pay is now 118 times that of the median UK full-time workers, up on the 108 times of 2021.
For researchers, the figures demonstrate that a “reset” post pandemic that would see CEO pay rises become more modest has not materialised.
“The median FTSE 100 CEO pay reached a five-year high at £3.91m,” says the High Pay Centre’s report, “representing an 16% increase from the previous year.
“This marks the second consecutive year of CEO pay growth since the pandemic-induced downturn, refuting the suggestion of an anticipated economic reset post pandemic that would include curbing top pay and reducing income inequality.”
Union dismay
The TUC responded with a social media message asking: “Who is really driving inflation?”
Sandy Pepper, a management professor and pay expert at the London School of Economics, says the rises will surprise many but CEO pay levels are still making their way back to pre-Covid levels.
“FTSE 100 CEO pay fell sharply during the pandemic, and hasn’t fully recovered since,” he says. “It shouldn’t really be a great surprise to see CEO pay in 2022-23 taking a further step back towards pre-pandemic pay levels.
“But the optics don’t look good and won’t help those seeking to resolve current pay disputes.”
The findings are likely to further stoke debate over pay levels after senior City figures raised the need for potentially higher CEO pay.
Julie Hoggett, chief executive of the London Stock Exchange, penned an article in May for the LSE’s website in which suggested pay needed to rise to compete for talent.
“We should be encouraging and supporting UK companies to compete for talent on a global basis, so we remain an attractive place for companies to base themselves, stay and grow,” she wrote.
“The alternative is we continue standing idly by as our biggest exports become skills, talent, tax revenue and the companies that generate it.”
At the time, Luke Hildyard, director of the High Pay Centre, described the remarks as “a little tone deaf”.
Meanwhile, the UK has witnessed a spate of shareholder revolts over executive pay during the current AGM season. Clarkson, the giant ship broker, saw a 43.69% vote against its remuneration report while Unilever saw opposition of 58%.
However, some investors were keen to see higher pay levels considered. In May, Peter Harrison , chief executive of Schroders, told the Financial Times: “There is a question that broader society needs to answer. Which is more important: limiting the gap between CEO and worker pay? Or accepting that boards need freedom to attract the best CEOs to run British companies for the best long-term outcomes?”
Executive pay is likely to remain a topic of intense debate. It was before the cost-of-living crisis and even more so now.