HPC research and commentary cited in debate about top pay
Last week the CEO of the London Stock Exchange, Julia Hoggett sparked controversy by warning that UK CEOs are paid too little by international standards, with implications for our leading businesses and the UK economy.
Hoggett claimed UK listed companies are struggling to keep with US firms who often pay 3 or 4 times that of UK rivals. She argued that without increasing pay, the UK will struggle to remain an attractive location for businesses.
A number of other city figures subsequently came out in support for Hoggett’s comments, arguing for fewer restrictions on executive remuneration.
This story has been covered widely by the media, with the High Pay Centre’s data and commentary featuring in reports by the Financial Times, Guardian, the Times and elsewhere.
We are unconvinced of the business case or the moral case for increasing executive pay. From a business perspective, there remains limited evidence of executives fleeing overseas due to low pay in the UK. And while executives in the UK are paid significantly less than in the US, they remain amongst the best paid in Europe. Assuming that some executive exodus did take place, the view that at prevailing rates (£3.4m a year for a FTSE 100 CEO) the only replacements willing to do the job would be so hopeless they would damage the companies and the country as a whole seems pretty ludicrous.
If UK companies really are struggling to find high calibre senior managers, that is perhaps a reflection of their training and development processes. There is certainly no shortage of people willing to work for £3.4m and there are hundreds of thousands of business and management graduates in the UK. The pipeline of potential future leaders is something boards and investors can address directly, unlike the constraints on their capacity to blow football transfer-style sums of money on their CEOs, and would be a better focus for their energies
In the context of the current cost of living crisis, in which British workers are experiencing the fastest decline in living standards in sixty years, anyone suggesting raising executive pay is priority risks appearing seriously out of touch. Public polling in the UK consistently shows, that most people consider existing levels of CEO pay excessive, and the current squeeze on living standards is only likely to strengthen that feeling.
While the UK economy teeters on the brink of recession, now has to be the time to prioritise raising the pay of low and middle income earners. Getting major employers to spend even more money on their millionaire executives, leaving less left over for their wider workforce, would have precisely the opposite effect.