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 2018 the average FTSE 100 CEO has earned:
Income inequality in the UK
Wealth inequality in the UK
- Are Chief Executives overpaid? Blog by HPC founder Deborah Hargreaves
Author of new book on top pay calls for a new corporate ethos - contact HPC to attend the launch on 11 October
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- HPC response to consultation on the Wates Principles for the governance of privately-owned companies
Large private companies should be subject to the same high standards of stakeholder engagement as publicly-listed counterparts