An annual assessment of FTSE 100 CEO pay packages released today shows that rewards at the top have dropped by almost a fifth, but still remain extraordinarily high.
The analysis, from the CIPD, the professional body for HR and people development, and the High Pay Centre, the independent think tank, shows that the average FTSE 100 CEO now receives an annual pay package of £4.5 million. This represents a 17% drop from £5.4 million in 2015. While this may represent a significant drop in CEO pay packages, it would still take the average UK full-time worker on a salary of £28,000 (median full-time earnings) 160 years to earn what an average FTSE 100 CEO is paid in just one year and 1,718 years to earn what Sir Martin Sorrell, CEO of WPP, received last year alone (£48.1 million).
Key highlights from the CIPD and High Pay Centre’s analysis 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 £4.7 million last year, compared with £2.6 million on average for women.
Peter Cheese, chief executive of the CIPD, said:
Stefan Stern, director of the High Pay Centre, said:
Business Minister Margot James said:
The CIPD/High Pay Centre’s analysis highlights how the gap between the highest and lowest FTSE 100 pay packages has closed as companies ‘chase the median’, which currently stands at £3.45 million. The average pay packages of the 25 highest paid CEOs have dropped by 24% to £9.4m in 2016. Conversely, the 32 lowest paid CEOs in the FTSE 100 have seen an increase in their overall package. The CIPD and High Pay Centre are warning that this trend of ‘chasing the median’ needs as much attention from the Government and investors as is given to earners at the top end of the scale.
Further findings from the CIPD/High Pay Centre analysis include:
- Median FTSE 100 CEOs’ pay in 2016 was £3.45 million, a drop from recent years and marginally higher than £3.39 million 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.
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.
In addition, the CIPD and High Pay Centre are recommending that the 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.
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