Chief executives slightly improved their pay against their median employees, signalling that pay gaps in the UK largest companies remain as wide as ever.
According to the High Pay Centre, a think tank, the ratio between the median chief executive and median employee in the FTSE 350 grew from 56:1 to 57:1 in the year to 2022.
A fifth of FTSE 350 companies have pay ratios of 100:1. A stand-out 3% of companies have ratios of 200:1.
Ratios based on the lowest pay levels have got better. The median chief executive earned a ratio of 75:1 when set against employees paid in the lowest 25%. That’s an improvement on 2021, when the figure stood at 80:1.
However, in the FTSE 100, the pay ratio of median CEO to median employee stood at 80:1 last year. The ratio with the lowest paid FTSE 100 employees stands at 119:1.
The High Pay Centre’s report says that, although calculation of pay ratios and pay gaps is problematic, it has “filled a gap” in corporate reporting.
‘Obscenely paid roles’
The report says “we need a fairer, more equal, more inclusive economy where companies create lots of well-paid jobs for all their workers, rather than a handful of obscenely paid roles for those at the top”.
It adds that the pay ratios are the “only reporting requirements that provide investors, workers and other stakeholders with consistent, comparable data on pay levels of workers outside the boardroom.”
Discussion of pay ratios comes in the same year that London Stock Exchange’s chief executive, Julia Hoggett, attempted to kick-start a discussion for higher pay levels among UK chief executives.
In May, Hoggett published a blog in which she said “often” attracting the best talent to CEO roles in the UK was “hampered by the advice and analysis of the proxy agencies and some asset managers voting against executive pay policies when those pay levels are significantly below global benchmarks”.
She added: “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.
“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 blog as “tone deaf”.
Last week, a survey from London Business School suggested companies were constrained by investors when research showed that 77% of non-executives say shareholder guidelines had caused them to offer lower pay levels.
However, the researchers point out that non-executives and shareholders believe that high pay levels are set not to provide material gain for CEOs but as a “fair” way to recognise “a job well done”.
In August, the High Pay Centre revealed that median FTSE 100 CEO pay now stands at £3.91m, up 16% on median pay for the top job last year.
At a time when households are still struggling with high inflation and high energy costs, executive pay remains contentious. That seems unlikely to change.