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Bosses' fall in pay 'limited and late'

Top chief executives’ pay has fallen in the past year, but there is still “a huge gap” between them and the rest of their staff, a report has said.The bosses of FTSE 100 companies now make on average £4.5m a year, down 17% from £5.4m in 2015, according to the High Pay Centre’s research.The think tank said the fall was welcome but “limited and very late”.It said the average UK full-time worker on gross pay of £28,000 would take 160 years to earn the same amount.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.” However, he added it was “so far, a one-off”.Mr Stern said large cuts in the salaries of some high-profile executives had contributed to the fall, skewing the results.The head of advertising giant WPP, Sir Martin Sorrell, took a £22m pay cut in 2016, as did Reckitt Benckiser chief executive Rakesh Kapoor, whose pay dropped by more than a third to £14.6m.”There were as many rises as fallers and yes, those big number falls have hit the average,” he added.The report said the pay ratio between FTSE 100 bosses and the average pay package of their employees had also fallen to 129:1 – meaning that for every £1 the average employee is paid, their chief executive gets £129. In 2015 the ratio was 148:1. Gender pay disparityThe study also found that, “in contrast to the generous pay packages awarded at the higher levels”, just over a quarter of top companies signed up to the voluntary living wage, which is higher than the minimum wage.

The research, which was carried out with the Chartered Institute of Personnel and Development (CIPD), also showed there were just six women among the top 100 chief executives, and they were paid on average £2.6m last year. CIPD chief executive Peter Cheese said: “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.” Edwin Morgan of the Institute of Directors said the gender pay gap was indicative of a whole array of problems regarding the promotion of women to senior levels.”There’s headhunters not putting enough women forward for the most senior jobs, there’s not enough women in the pipeline right at the top, that’s why they’re under-represented as a whole. “There’s also unconscious bias. It is a big systemic problem and it is not just the pay issue.”The government is trying to tackle this particular issue of women in executive positions through the Hampton-Alexander review, but it is something all businesses have to recognise. “We have a big problem here right at the top of these biggest companies. “The report said one explanation for the fall in top bosses’ pay was that “it has become hard for organisations to justify further growth in [chief executive] pay while the wage progression for the typical British worker has been so subdued”.Another was that politicians had become more interested in executive pay, with Theresa May criticising the “growing gap between rewards for those at the top and those who were just about managing”.’Not a threat’The report also questioned whether the government would now “devote all its energy on Brexit”. “Our concern is that if the government vacates this space [chief executive] remuneration will accelerate once more,” it said. “Therefore we want to see Theresa May stick to her guns and introduce a bill to reform executive pay before the year end.”But whatever the government does, the report advises firms to adopt the use of pay ratios showing the difference in earnings between the chief executive and average employees. It said these “should not be seen as a threat or punishment but rather as a mechanism to bring about greater fairness and transparency at work, and avoid the demotivating effects of unjustified wage gaps”.The employers’ organisation, the CBI, said: “Where pay does not match performance, business leaders can appear detached from society and not committed to fairness.”Recent changes in executive pay growth show the vast majority of firms have taken this message on board.”
Source: BBC News

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My name is Joel Bissitt. I have been an entrepreneur for 24 years and have run many small businesses across various sectors. For the last 10 years I have worked mainly within online media, franchising and small business start-ups. I am an author of various websites including Franchise UK https://www.franchise-uk.co.uk

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