The campaign for higher FTSE CEO pay and its discontents

Experts push back as supportive media coverage of calls for higher FTSE CEO Pay grows

In the UK in recent months there has been an ongoing campaign to raise executive pay levels at UK companies, with proponents arguing this is necessary to enable UK listed firms to better compete with American rivals. Media coverage has been largely favourable to such arguments including these pieces in the Telegraph, the Spectator and the Financial Times.

But evidence  of a ‘brain drain’ from the UK to the US and the dubious basis for thinking that a better paid CEO automatically leads to better business performance is limited beyond the anecdotal. Furthermore, as the Guardian’s recent piece on the topic rightly highlights, the scale of S&P firms are in general much larger than most FTSE companies, which is a significant factor in the higher levels of CEO pay at US listed firms.

Beyond this though, another recent report in the Guardian  should also remind us why using the US as a template of something to aspire to is a highly flawed one, with research from the organisation Americans for Tax Fairness showing that 35 major US companies including Tesla, Netflix and T-Mobile US spent more money on executive pay between 2018 and 2022 than they paid in tax. Is that really something we should or must accept, or is it reasonable and realistic to think we could aspire to something better? It would be interesting to see the response if this settlement were described to the public in such plain terms, in a forum more widely read than an FT editorial.

Besides this, there are well-documented links between greater inequality and greater socioeconomic problems. This means that there’s a reason to be concerned about this, beyond just finding it morally objectionable that a small number of people are paid far more than anyone else without necessarily working far harder than them.

We have made our case against this campaign alongside a range of academics who are experts on CEO pay, management and inequality in a letter to the UK’s largest asset management companies and pension funds. This letter has been covered in the Guardian and the I. The full letter as well as a summary of its key points is available here.