High Pay Centre/CIPD executive pay survey 2018
New research from the High Pay Centre and the CIPD finds that median pay for a FTSE 100 CEO leapt 11% in 2017
The annual High Pay Centre/CIPD assessment of FTSE 100 CEO pay packages has found that CEO median pay rose by 11% between 2016 and 2017, despite prominent criticism from the investor community and the Government over excessive CEO pay awards in the past year.
FTSE 100 CEO median pay now stands at £3.93 million per year, an increase on £3.53 million in 2016.
The analysis is affected by two very large payouts for the CEOs at Persimmon and Melrose Industries (£47.1 million and £42.8 million respectively). As a result of this, this year’s CIPD/High Pay Centre report leads with the median, rather than the mean figure. Using the median measure of CEO remuneration reduces the impact of these two outliers, but it still shows an increase in earnings of 11%, compared to the 2% rise in median pay enjoyed by full-time workers over this period.
However, if the mean measure is used, then it shows that CEO mean pay across all FTSE 100 companies has increased by 23% over the same period, from £4.58 million in 2016 to £5.66 million in 2017. Excluding Persimmon and Melrose Industries from the analysis would see the 2017 mean CEO single figure fall from £5.66 million to £4.85 million. However, this is still higher than last year’s overall mean figure of £4.58 million by 6%, showing this continued underlying trend of rising executive pay.
Further highlights from this year’s CIPD and High Pay Centre analysis include:
- The highest paid CEO in the financial year ending 2017 is Jeff Fairburn of Persimmon plc who has received £47.1 million, 22 times his 2016 pay. Simon Peckham of Melrose Industries plc received £42.8 million, 43 times his 2016 pay.
- The mean pay ratio between FTSE 100 CEOs and the mean pay package of their employees is 145:1, which is higher than last year (128:1 in 2016, 146:1 in 2015).
- As a FTSE 100 CEO, you are as likely to be named David or Dave, or Stephen or Steve, as you are to be a female CEO. Just seven FTSE 100 CEOs are women, an increase from six in 2016 and five in 2015. At the current rate of one new female CEO each year it will take another 43 years for women to make up 50% of the FTSE 100 CEOs.
- While women make up 7% of FTSE 100 CEOs, they earn just 3.5% of total pay.
- Only 34 companies in the FTSE 100 are accredited by the Living Wage Foundation for paying the living wage to all their UK-based staff.
To achieve fairer and more ethical approaches to pay and reward, the report makes the following recommendations:
- Rather than waiting for the pay ratio reporting requirement to come into force in 2019, companies should introduce it immediately, supported by a clear narrative.
- Companies should provide clearer information about wider pay distribution within their organisations.
- Policy-makers and companies should review whether existing remuneration reports can be reduced in length and complexity to ensure they can be easily scrutinised
- Remuneration committees and shareholders should place stronger emphasis on ensuring CEO reward is aligned with pay practices throughout the organisation.
- Remuneration committees should ensure that CEO performance is assessed by non-financial as well as financial measures, including investment in workforce training and development and indicators of employee satisfaction and well-being.
- HR professionals have a vital and critical role to play in influencing remuneration committees and must ensure that senior leaders receive and act on the insights from pay data, appreciating the various ways that reward can incentivise and affect behaviours and performance across the workforce.
Since 1 January 2019 the average FTSE 100 CEO has earned:
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