FTSE100 CEOs earn 109 times more than average worker
Is this contributing to the ‘Great Resignation’?
Why You Should Care
Research by the High Pay Centre shows that FTSE100 CEOs were paid 39% more than in 2020.
Their median pay reached £3.41 million.
Are these pay rises sustainable (and a clever idea) in a looming recession?
The pandemic caused economic strain for many businesses and their employees.
As a result, CEO pay dropped in 2020. Research by PricewaterhouseCoopers (PwC) found that FTSE100 CEO pay dropped 9% to £2.9 million in 2019. Nearly 45% faced a salary freeze; down from 52% in 2019, according to PwC.
In addition, data from the UK’s High Pay Centre found that 64% of CEOs received bonuses in 2020; this is down from 89% in 2019.
However, High Pay Centre’s 2021 research found that CEO pay has rebounded, “while ‘pay ratios’ between lead executives and their employees widened”. Thereby, “any hopes that the pandemic had engendered a new spirit of solidarity resulting in lower levels of top pay and reduced income inequality were quickly dashed”, according to the report.
Between 2020 and 2021, FTSE100 median CEO pay rose 39% from £2.46 million to £3.41 million – this is the highest wage level since 2018. Mean pay reached £4.26 million in 2021, up from £3.4 million in 2020.
As a result, FTSE100 CEOs are now paid 109 times more than the average UK worker – the figure was 79 times in 2020, and 107 times in 2019.
Three times as many FTSE100 companies increased CEO pay in 2021 than decreased it. 72 of companies paid their CEOs more than in 2020, and just 24 reduced wages.
Also, more CEOs received bonuses than in 2020. 90% of CEOs got a bonus in 2021, this is up from 64% in 2020 – the bonus they received also increased from $828,000 to £1.4 million over the year.
The High Pay Centre also looked beyond CEO pay, and towards executive pay in general. It found that FTSE100 companies awarded £720.21 million to 224 executives in 2021.
The median that FTSE100 companies spent on their executives in 220 was £6.3 million.
Deep dive into the highest paid CEOs
According to the High Pay Centre, the highest paid CEO in 2021 was Sebastien De Montessus, the CEO of Endeavour – he earnt $16.85 million.
In second place was AstraZeneca’s Pascal Soirot on $13.85 million; Soirot had been the highest paid CEO in 2020.
Other companies with highly paid CEOs include Anglo American, Lloyds Banking Group and GlaxoSmithKline.
According to the High Pay Centre, the companies that awarded the biggest CEOs pay increases between 2020 and 2021 were RELX, Harbour, Pearson, Diageo and Howden.
While the FTSE 100 organizations that spent the most on executive pay generally in 2021 include Berkeley, GSK, AstraZeneca, Anglo American and Experian.
These huge executive wage increases occur in a scenario where the public do not want CEO salaries to be more than time higher than that of the average worker, according to polling.
Instead, the public wants businesses to treat their employees better, as well as for companies to be more sustainable and eco-friendly.
So could organizations that even out the discrepancy between employee wages and executive pay thrive in the ‘Great Resignation’?
The High Pay Centre thinks so. “Those companies that are bold enough to take action to rebalance their pay distribution, with reductions in the vast awards made to those at the top contributing to increases for low and middle earners, would generate significant public goodwill.”
The current public bad will towards rising CEO pay is likely to worsen if the hikes continue despite the fact that inflation has reached 40-year in the UK and beyond.
A recession is looming, and take home wages in the UK and across Europe are falling at the fastest rate on record.
Companies need to think very carefully about how much they pay their executives this year, particularly if they are considering layoffs or ruling out pay rises for the rest of their workforce.
The reputational damage of raising CEO pay, while not looking after ordinary workers, could be significant and long-lasting.
“Tackling the pay disparities at Britain’s biggest companies can play a central role in ensuring that workers get the pay rise they deserve, and that motivated workforces can play a crucial role in revitalizing the British economy,” concluded the High Pay Centre.
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