Mythbuster: Are huge executive pay packages really vital to UK competitiveness?
As part of the New Economics Foundation's 'mythbuster' series, Luke Hildyard debunks the myths used to justify excessive executive pay
We’re encouraged to believe that company executives are talented wealth creators, worthy of extreme pay packages which supposedly drive them to work hard to the benefit of society.
As part of the New Economics Foundation's mythbuster series, Luke Hildyard analyses the arguments put forward to justify the shocking growth in executive pay packages over the past thirty years, finding that there is little evidence to support them:
- the risk of executives moving overseas is greatly exaggerated - less than 1% of the world's biggest companies have lured the CEO of an overseas rival with an increased pay package
- there is little evidence to support the idea that there is a finite pool of irreplaceable company leaders - internally-promoted executives, nurtured by strong personal development programmes, tend to perform better than supposed superstars recruited from external competitors
- For all the talk of 'performance related pay' the rapid growth in executive pay packages - driven by huge increases in bonuses and incentive plans - has brought about little improvement in company performance
The fact that these myths have been allowed to take hold has greatly exacerbated levels of socially-divisive inequality in the UK, while the increased share of the national income captured by the richest 0.1% diverts wealth from low and middle-income households.
Since 1 January 2019 the average FTSE 100 CEO has earned:
Income inequality in the UK
Wealth inequality in the UK
- Blog: Pay Inequality in housebuilders exemplifies our broken economic system
On Thursday, Siobhain McDonagh, Labour MP for Mitcham and Morden, led a Commons debate on the UK’s ongoing housing crisis on the back of our new High Pay Centre report exposing the shocking scale of pay inequality among the UK’s biggest housing firms.
- Britain’s housing crisis: CEOs at house building companies earning mouthwatering sums
Research shows scale of pay inequality in the housebuilding industry
- Blog: The average CEO-worker pay ratio is down – so are shareholders winning the debate?
The average CEO-worker pay ratio is down – so are shareholders winning the debate against excessive pay?