High Pay Centre briefing: The effect of executive pay reforms
HPC analysis of the first executive pay awards made following Government reforms in 2013
Regulations introduced by the Coalition Government to reduce the runaway growth of executive pay have had little effect, according to new research published today by the High Pay Centre.
Despite high profile shareholder revolts at companies such as Barclays, Astra Zeneca and Standard Chartered, no FTSE 100 company has seen a majority of shareholders oppose either the pay package awarded to their Chief Executive in 2013 or their pay policy in future years.
The High Pay Centre research analysed pay for Chief Executives across the first FTSE 100 companies to report under the new regime, in the final three months of 2013. Average CEO pay awarded in 2013 by the 67 companies covered stood at £4.5 million. Manifest/MM&K reported a figure of £4.3 million for the FTSE 1OO index as a whole in 2012.
The research also found that:
- Median pay across the companies studied was £3.9 million – a small increase from the £3.8 million recorded in 2012
- The average planned pay-out for target performance in 2014 is £3.4 million. For maximum performance, the average CEO would earn £5.8 million.
- Many companies are flouting new regulations requiring them to compare pay increases for CEOs and other employees by exploiting a clause enabling them to choose a smaller comparator group than their total workforce. The comparator group chosen by some companies, including TUI Travel, British American Tobacco, GKN and International Consolidated Airlines Group, represent less than 1% of their employees
High Pay Centre Director, Deborah Hargreaves said: These figures show that the new regulations are not enough to bring top pay back to a level that is sensible, fair or proportionate. Over the past 15 years, pay for a FTSE 100 CEO has gone from being 60 times the average UK worker to 160 times, without any justification. All workers should share in a company’s success - our economy cannot succeed in the long-term if a tiny group at the top pull further and further away from everybody else.
Notes to editors:
- The High Pay Centre’s analysis covers FTSE 100 companies whose most recent financial year end fell between 30 September and 31 December 2013.
- The Business, Enterprise and Regulatory Reform Act (2013) gives shareholders a binding vote on executive pay policy and requires companies to publish a ‘single figure’ for executive pay awarded that year in comparison with the previous year. Shareholders also have an advisory vote on pay awarded. The Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013 requires companies to disclose the average pay increase (excluding so-called ‘Long Term Incentive Plans’, the largest single component of executive pay) for the company CEO and for the workforce as a whole. However, it also allows for companies to choose a smaller comparator group of employees if this is deemed more appropriate.
- The High Pay Centre has argued that ordinary workers should be represented on the remuneration committees that set pay for company executives, and that companies should also be required to publish the pay ratio between their CEO and their lowest paid employee
Since 1 January 2017 the average FTSE 100 CEO has earned:
Income inequality in the UK
Wealth inequality in the UK
- Full text of joint CIPD/HPC submission to UK BEIS department Feb 2017
This unprecedented joint submission signifies the importance of this moment: an opportunity to make meaningful, lasting reforms to executive pay and boardroom culture and practice
- Joint HPC/CIPD response to government corporate governance green paper
Reform of pay and governance structures matter to all employees. We are pleased to make a joint submission with the CIPD
- Fat Cat Wednesday 2017
Welcome back to work. FTSE100 bosses will have already clocked up an average annual UK salary by lunchtime today.