FTSE 100 CEO pay drops by almost a fifth, but more needs to be done
03 August 2017 -
CIPD and the High Pay Centre call for more transparency around executive pay
The average FTSE 100 CEO pay package has dropped by 17%, according to a new report from the High Pay Centre and CIPD. The report found that that the average FTSE 100 CEO now receives an annual pay package of £4.5m, down from £5.4m in 2015.
While this may represent a significant drop in CEO pay packages, it would still take the average UK full-time worker on a salary of £28,000 160 years to earn what an average FTSE 100 CEO is paid in just one year, and 1,718 years to earn what Sir Martin Sorrell, CEO of WPP, received last year alone (£48.1 million).
In fact, 60 of the FTSE 100 CEOs are paid more than 100 times the typical annual pay of a UK worker and the report also revealed a gender pay gap at the top of the UK’s biggest companies.
There are just six female FTSE 100 CEOs, with women making up 6% of the FTSE 100 but earning just 4% of the total pay. Male CEOs in the FTSE 100 earned on average £4.7m last year, compared with £2.6m on average for women.
CIPD chief executive Peter Cheese said: “We have to hope that the reversal in rising executive pay is the beginning of a re-think on how CEOs are rewarded, rather than a short-term reaction to political pressure. The fall in executive pay is a step in the right direction, but it’s still happening within an overall reward system where average wages in the UK have been flat.
“Rather than focusing predominantly on share price or short-term profit, we need a much more balanced scorecard for performance that also takes account of other indicators of success such as investment in people, social responsibility and accountability, and long-term value creation. High pay must be addressed as part of the much broader review of UK corporate governance.”
CMI chief executive Ann Francke said: “High profile cases of runaway executive pay and ‘rewards for failure’ have fuelled a breakdown of trust in business that needs to be rebuilt. As the High Pay Centre / CIPD report highlights, we need to introduce a fairer ratio between executive and average pay.
“We also need transparent reporting and stronger remuneration committees to make sure executive pay packages are based on long-term evaluation of performance.”
To advocate fairer and more ethical approaches to pay and reward, the CIPD and High Pay Centre have recommended that all publicly listed companies should be required to:
- publish the ratio between the pay of their CEO and median pay in their organisation, within the context of their overall reward strategy;
- have employee representation on their remuneration committee; and
- establish a human capital development sub-committee with a wider remit to focus on all aspects of people, culture and organisation to provide better insight and guidance to the Board and beyond.
The CIPD and High Pay Centre are also recommending that the Government should set voluntary human capital reporting standards to encourage all publicly listed organisations to provide better information on how they invest in, lead and manage their workforce for the long-term.
Powered by Professional Manager