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Perspectives on Cyber Risk
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FTSE100 CEO pay is reportedly decreasing

FTSE100 CEO pay is reportedly decreasing

August 7, 2017 12:29 PM | Print this page

According to a report from CIPD and the High Pay Centre, an annual assessment of FTSE100 CEO pay packages has found that CEO pay has decreased significantly (17% drop from 2015) but 'still remains extraordinarily high'.

Key findings highlighted in the press release include:

  • In 2016, the pay ratio between FTSE 100 CEOs and the average pay package of their employees was 129:1 – so for every £1 the average employee is paid, their CEO receives £129. In 2015, the ratio was 148:1.
  • 60 of The FTSE 100 CEOs are paid more than 100 times the typical annual pay of a UK worker which currently stands at £28,000 per year (mean earnings).
  • In contrast to the generous pay packages awarded at the higher levels, just over a quarter of The FTSE 100 are accredited by the Living Wage Foundation for paying the voluntary living wage to all their UK-based staff.
  • There are just six female FTSE 100 CEOs. While women make up 6% of The FTSE 100, they earn just 4% of the total pay. Male CEOs in The FTSE 100 earned on average £4.7m last year, compared with £2.6m on average for women.
  • Median FTSE 100 CEOs’ pay in 2016 was £3.45m, a drop from recent years and marginally higher than £3.39m in 2010.
  • Comparing the median pay of a FTSE 100 CEO to that of a full-time worker, the pay ratio stands at 122:1, or 149:1 when compared against all UK employees. This ratio rises to 132:1 when comparing the average or ‘mean’ pay of a FTSE 100 CEO with that of a full-time worker across the whole UK economy.

Report Recommendations
To advocate fairer and more ethical approaches to pay and reward, the CIPD and High Pay Centre have recommended that all publicly listed companies should be required to:

  • Publish the ratio between the pay of their CEO and median pay in their organisation, within the context of their overall reward strategy.
  • Have employee representation on their remuneration committee.
  • Establish a human capital development sub-committee with a wider remit to focus on all aspects of people, culture and organisation to provide better insight and guidance to the Board and beyond.
  • Government should set voluntary human capital (workforce) reporting standards to encourage all publicly listed organisations to provide better information on how they invest in, lead and manage their workforce for the long-term.

The FT writes that the research comes as UK Prime Minister Theresa May’s government prepares to publish its proposed responsible business reforms next month and after Ms May warned of an 'irrational, unhealthy and growing gap' between the pay of executives and workers. The FT adds that the Conservatives promised in their manifesto to introduce 'strict annual [shareholder] votes' on executive pay at listed companies, against the current three-yearly requirement but that as the proposals were not included in the Queen’s Speech, it may mean that they will not become law in the next two years.

[Sources: The FT 03/08/2017; The High pay centre: Reality Bites - average FTSE100 CEO pay package down 17% on previous year blog]