HPC/CIPD Annual FTSE 100 CEO Pay Review – CEO pay flat in 2019

By 04.08.20Publications一FeaturedSeptember 29th, 2020No Comments

Median FTSE 100 CEO pay stands at £3.6 million – almost 120 times the average UK worker – but pandemic pay cuts could mean figure falls next year

The High Pay Centre and CIPD annual assessment of FTSE 100 pay packages shows that median pay for chief executives fell by 0.5% between 2018 and 2019 at £3.61m compared to £3.63m. However, this is still 119 times that of the average (median) UK full-time worker earning £30,353.

Subsequent pay cuts made in light of the coronavirus pandemic could result in more substantial falls this year, but the extent of CEO pay reductions varies significantly from firm to firm, and pay will also be influenced by ongoing stock market changes.

Key findings from the survey were as follows:

CEO pay in 2019

  • For the financial year ending 2019, the report finds that FTSE 100 CEOs took home a median pay package worth £3.61m, which is 119 times greater than the median earnings of a UK full-time worker (£30,353). This is broadly the same as the median FTSE 100 CEO salary for the financial year ending 2018 (£3.63m) and only represents a 0.5% decrease.
  • The highest paid FTSE 100 CEO received a total pay package of £58.73 million. This is 1,935 times the median salary of a full-time UK worker
  • Six firms paid their CEOs more than £10 million in total
  • 70 companies disclosed the pay ratio between their CEO and the median pay of their UK employees. The highest quoted pay ratio was 2,605:1 and the lowest was 15:1. The median was 84:1
  • Performance-related pay policies also continue to pay out as a matter of course: 88 FTSE 100 companies paid their CEO an annual bonus in 2019, with total payments reaching £108.48 million. So-called ‘Long Term Incentive Plans’ (LTIPs) paid out at 81 companies, totalling £238.19m.

Covid-19 pay cuts

  • 36 FTSE 100 companies have announced cuts to executive pay in response to the COVID-19 crisis and economic downturn.
  • While most of the 36 companies have used a combination of measures to cut pay, the report suggests these are mainly superficial or short-term. The most common measure, taken by 14 companies, has been to cut salaries at the top by 20%. However, salaries typically only make up a small part of a FTSE 100 CEO’s total pay package.
  • 11 companies have cancelled Short-Term Incentive Plans (STIPs) for their CEOs while two other firms have deferred salary increases for their CEOs. None of the 36 companies have chosen to reduce their CEO’s Long-Term Incentive Plan (LTIP), which typically makes up half of a CEO’s total pay package.

The report argues that very high CEO pay risks undermining the spirit of solidarity that many companies are trying to project as they battle against the impact of the coronavirus. The current economic uncertainty should encourage companies to consider whether the scale of pay awards reflect good business sense and the CEO’s individual contribution to the company’s success. The relatively small cuts to pay that CEOs have made to date suggest this is not yet happening.

The CIPD and High Pay Centre argue that this strengthens the case for reforming remuneration committees to ensure CEO pay awards are fair, proportionate and assessed in a way more reflective of the pay of the wider workforce is determined.