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 2017 the average FTSE 100 CEO has earned:
Income inequality in the UK
Wealth inequality in the UK
- A government which has lost its purpose
High Pay Centre response to the Queen’s Speech – 21 June 2017
- Welcome common sense on pay ratios
High Pay Centre statement on the Conservative party manifesto
- Election 2017: statement on Labour manifesto
The Labour Party is proposing an "Excessive Pay Levy" on businesses offering very large salaries