Investor stewardship and concerns about inequality are beginning to register – but economic inequalities persist as CEO’s continue to enjoy pay awards 117 times larger than the average worker
An annual assessment of FTSE 100 pay packages shows that median pay for chief executives fell by 13% between 2017 and 2018. However, the average (median) CEO salary of £3.46 million a year is still more than 117 times that of the average (median) UK full-time worker earning £29,574. In addition, 1,394 ‘key management personnel’ across the FTSE 100 are paid an average (mean) of £1.5 million each.
Highlights include:
- FTSE 100 CEO median pay has fallen by 13% from £3.97 million in 2017 to £3.46 million in 2018. Despite the fall, their pay is still 117 times that of the average (median) UK full-time worker earning £29,574 and it would take the average (median) FTSE 100 chief executive just three days to earn this amount.
- The fall in pay is likely to be due to a combination of factors including: The possibility of greater restraint on high pay; Less money being awarded through LTIPs due to variable corporate performance and the cyclical nature of pay-outs, which sees a temporary spike in CEO reward every few years. Such ‘vesting’ cycles contributed to a fall in CEO pay in 2016 followed by a big increase again in 2017.
- 43 CEOs in the FTSE 100 saw their pay increase between 2017 and 2018.
- Complex LTIPs (long-term incentive plans) continue to form the biggest component of executive pay, despite criticism from a number of stakeholders, and were awarded to 84% of CEOs. Pensions also make up a significant amount of executive reward. As a percentage of base salary, CEOs get a pension contribution (or payment in lieu of) worth 25%. By contrast, employees get a contribution worth 8% of their wages.
- In total, £465.4 million was paid out to FTSE 100 chief executives in the financial year ending 2018. If we divide this equally across the FTSE 100 companies covered in the report it gives a mean annual pay package of £4.7 million, a drop of 16% from last year.
- The CIPD/High Pay Centre calculate that the mean pay ratio between FTSE 100 CEOs and the mean package of their employees is 114:1. This is lower than last year (144:1 in 2017, 130:1 in 2016).
- 64% of workers agree that CEO pay is too high in the UK, with just 4% disagreeing that this is the case.
The report argues that the fall in the pay of FTSE 100 CEOs is welcome and reflects improvements to the governance of the UK’s biggest companies, and a growing recognition of the need to address the rampant economic inequality in the UK. At the same time, CEO pay awards and the share of total incomes going to the very richest in society remain very high compared to the level of 20 years ago. There is still more to be done to align pay practices with the interests of wider society and give the public confidence that our biggest businesses are working for the good of the economy as a whole rather than the enrichment of a few people at the top.