CEO pay data prompts questions of fairness

New analysis of FTSE100 CEO pay suggests a fall in total remuneration for the UK's top business leaders. However, the pay gulf between bosses and the wider workforce remains in triple digits.

Ruth Holmes

21 August 2019

The average FTSE100 chief executive continues to earn 117 times more a year than the average UK full-time worker according to figures from the CIPD and High Pay Centre released today.This despite analysis showing overall average CEO pay fell by 13% from £3.97 million in 2017 to £3.46 million in 2018.The figures mean it takes the average (median) FTSE 100 chief executive just three days a year to earn this amount: a day the first working week back in January dubbed "Fat Cat Friday" by the High Pay Centre.

CEO pay and UK

With trust in business under tight scrutiny, and Brexit putting both the UK’s global economic competitiveness and social justice in the spotlight, the issue of executive pay is key, believes the CIPD. Peter Cheese, chief executive of the professional body for HR and people development, said: “Fairness is one of the biggest challenges facing society today. The gulf between the pay at the top and the bottom ends of companies is slightly smaller this year but it’s still unacceptably wide and undermines public trust in business.“We must question if CEOs are overly focused on financial measures and are being incentivised to keep share prices high rather than focusing on the long-term health of their business.”

CEO pay in the global talent pool

For companies operating overseas and with global mobile workers, the issue of pay and equity is also highly relevant and sensitive.By sector, the High Pay Centre’s data shows that CEOs of oil and gas companies have some of the largest average total pay packages (£14.35mn), and among the highest disparities between highest and lowest paid (130:1). Fast-moving consumer goods (FMCG) is another sector where CEOs receive among the highest salaries in the FTSE100. However, this comes with increased shareholder scrutiny, the analysis suggests.Unilever (3) and Reckitt Benckiser Group (8), along with Pearson (4), British American Tobacco (5) and Experian (7) were among the top ten companies receiving the lowest votes of support for their remuneration policies according to the report, Executive pay in the FTSE 100: Is everyone getting a fair slice of the cake?

Gender pay and seniority gap persists

The latest data also shows the ongoing imbalance between the number of male and female CEOs and their share of pay. A man name Steve or Stephen is more likely to run a FTSE company than a woman, finds the report.In 2018 there were just six female CEOs in the FTSE 100, falling from seven in 2017. While women make up 6% of the FTSE 100 CEOs, they earn just 4.2% of the total pay. However, this is a slight improvement on last year when the seven female CEOs earnt just 3.5% of total pay.

'Pay distribution increasingly important'

Luke Hildyard, director of the High Pay Centre, said: “At a time when we’re struggling to generate economic growth, how pay is distributed between those at the top and everybody else becomes increasingly important."A slight 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.”