An annual assessment of FTSE 100 CEO pay packages released today shows that CEO median pay rose by 11% between 2016 and 2017, despite criticism from government and investors over the excessive pay packets.
The research from the CIPD, the professional body for HR and people development, and the high Pay Centre has revealed that FTSE 100 CEO median pay now stands at £3.93m per year, £400,000 more than the £3.53m reported in 2016.
However, the study noted that this year’s analysis is affected by two very large payouts for the CEO’s at Persimmon and Melrose Industries (£47.1m and £42.8m respectively). In order to account for this, the report this year is leading with the median figure, rather than the mean, but still illustrated a significant increase in earnings of 11%, compared to the 2% rise in median pay enjoyed by employees.
If the report were to look at the mean figure, as it has done previously, CEO pay packages across all FTSE 100 companies would have increased by a staggering 23% over the same period, from £4.58m in 2016 to £5.66m in 2017.
Commenting on the findings, CIPD chief executive Peter Cheese said: “Despite increased investor activism and the planned introduction of pay ratio reporting, the evidence suggests that very little is changing when it comes to top pay in the UK. It’s disappointing to see that CEO pay has held up in the face of increasing pressure when average pay across the workforce which has barely shifted in recent years. However, pressure is building in the system.
“Given the ongoing issues of trust in big businesses and a push for greater transparency, it really is time businesses and boards put greater scrutiny on high pay, and that they think much more objectively about what they are rewarding CEOs and how. Financial performance alone does not signify CEO success, and must be balanced with development of the organisations long-term sustainability and value. Investors and boards need to look beyond share price, and consider a much broader range of indicators that show how that individual is performing for the long-term good of the business, its workforce and other stakeholders.”
High Pay Centre director Luke Hildyard stated that it is “unsettling” to see such a substantial pay gap between CEO’s and ordinary workers.
“When CEOs are happily banking ever larger bonuses while average worker pay is squeezed, then something is going very wrong. Recent revolts on pay awards show that shareholders are increasingly sharing this frustration at unjustifiable pay awards. Executive pay must match performance. Boards and Remuneration Committee Chairs need to ensure that CEOs are rewarded for delivering genuine long-term value for the company. If Boards and Remuneration Committee chairs are so out of touch they are prepared to waive through off-the-scale reward packages, then shareholders must strike back and hold them to account,” he added.
Hildyard concluded that, if businesses do not step up on executive pay, then government will need to intervene.
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