This report from the CIPD and the High Pay Centre examines how chief executives working for FTSE 100 firms are rewarded, examining such aspects of remuneration as salaries, bonuses, long term incentives plans and benefits. It lists CEO pay data by mean and median, by industrial sector, by firm size and by gender. It also has some recommendations for stakeholders interested in creating a fairer and more ethical approach to employee reward.
Since our previous annual review of FTSE 100 chief executive remuneration, the level of structure of CEO reward has continued to be a central theme of wider debates about corporate governance, economic inequality and prevailing workplace culture and employment practices. In this year’s report, the finding that chief executive pay has increased will no doubt spark further controversy.
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The total income received by chief executives working for current FTSE 100 firms was £560.1 million in the financial year ending 2017. If we divide this amount equally among all the CEOs covered by our report, they would each receive a mean annual package worth £5.7 million, 23% higher than the 2016 mean figure of £4.6 million.
However, CEO pay is not distributed evenly. If we rank the CEO pay in the FTSE 100 from the lowest to the highest, then the mid-point in this range is worth £3.9 million, which is 11% higher than the median figure of £3.5 million paid in 2016.
By contrast, data from the Office for National Statistics indicates that mean pay for full-time workers has increased marginally by 3% over this period from £34,414 to £35,423, while median pay for full-time workers had risen by just 2% from £28,213 to £28,758.
To help create fairer and more ethical approaches to employee reward, HR should champion a better understanding:
- within the organisation about how employees create and add value. Too often corporate performance is defined mostly through achievement of financial measures. However, this is only part of the equation. Other metrics of success should relate to how all workers - irrespective of their contracts - are managed, developed and rewarded.
- that business success is a collective endeavour. Too often, corporate achievement is ascribed to the efforts of those at the top and that is where pay is concentrated. To address this, HR should ensure that there is more alignment through the organisation over how individuals are rewarded relative to their contribution.
- of how reward influences behaviour. Insights from behavioural science indicate that the current way CEOs are rewarded doesn’t necessarily result in enhanced company performance. It suggests that current remuneration is too complex and the targets too remote to incentivise behaviour. Instead, smaller, simpler and more immediate rewards could have more of an impact.
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