CEO Pay Falls but Still 160 Times More Than Average Wage

CEO Pay Falls but Still 160 Times More Than Average Wage

Research from the High Pay Centre and the Chartered Institute of Personnel and Development (CIPD) has revealed that top bosses have seen their pay fall in the past year. Though it’s fallen, it’s still much higher than the average wage. The High Pay Centre said that there’s still “a huge gap” between bosses and the rest of their workers.While the news is welcome, the thinktank says that this is “limited and very late”.

Chief executives of FTSE 100 companies now make an average of £4.5 million a year. This is a decrease of 17% from £5.4 million in 2015. The thinktank said that the average full-time worker earns £28,000 before tax. To put it in perspective, an average worker would take 160 years to earn the same amount as their bosses do.

Despite the huge pay packages awarded to executives, only a quarter of companies agreed to pay the voluntary living wage to their employees. Director of the High Pay Centre, Stefan Stern 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 does acknowledge that this seems to be “so far, a one-off”.

CEO Pay Falls but Still 160 Times More Than Average Wage

Pay cuts for the rich

Top bosses are seeing their pay cut by millions. For example, Sir Martin Sorrell, head of advertising at WPP had his pay cut by £22 million last year. Rakesh Kapoor, chief executive of Reckitt Benckiser had his pay cut by £14.6 million, or a third of his typical wage.

The report highlights that the pay ratio between bosses and employees has fallen to 129:1. It was 148:1 in 2015.

Pay disparity between men and women

Of the 100 chief executives in 2016, there were just six women. This has since increased but only to 30. They were paid on average £2.6 million and earned only 4% of the overall earnings for FTSE 100 bosses.

Peter Cheese, chief executive of CIPD 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 by millions.

Why pay has fallen

One of the explanations for this fall in pay could be, as the report suggests 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”. There is also more of a focus on pay disparity between executives and employees and between men and women. Theresa May criticised the “growing gap between rewards for those at the top and those who were just about managing”.

However, there is concern that issues like this are at risk of being swept under the carpet while the government’s attention is focused solely on Brexit and other matters. The report urges the government to stick to its promises here and adopt the use of pay ratios that will show the difference in earnings between those at the top and their workers.

 

How do you feel about the pay gaps between executives and average workers? Would you like to see a greater fall? Let us know what you think.

Kara is a content writer for The Accountancy Partnership.