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CEO Pay Drop

Posted 22.08.19

For many of us, the role of big-shot CEO is but a distant dream, not to mention the generous benefits that come with it.

A big salary and bonus have become synonymous with large multinational companies – but could change be on the horizon? The most recent findings have shown that the pay gap between FTSE 100 CEOs and employees has shrunk to the lowest in five years.

Salaries for those at the top of the corporate food chain have fallen from an average of £4 million a year, to £3.4 million over a 12 month period. This 13% decrease has been felt by some of the industry big hitters, including Barclays, Ocado and Standard Life. 

Why has this happened?

Experts believe that the fall in pay is likely due to greater restrictions on high pay for CEOs, coupled with a requirement introduced in 2014, instructing companies to provide a single figure for total pay. However, although there have been no increases in base salary for CEOs, the bonuses that they were awarded remained largely unchanged. Furthermore, the salary of those at the top is often cyclical and subject to spikes in performance. According to many incentive plans, executives now have to wait five years to receive any shares in a company; which could contribute to these spikes.

Despite this perceived step in the right direction, the average CEO salary is still more than 117 times greater than that of the average UK salary of £29,574. This means that the average top dog would take three days to earn what the average employee would earn in a year. This further highlights the great disparity that exists between those at opposite ends of the corporate ladder, and the need for greater scrutiny of executive pay.

It’s not just about money

But it’s not just financial disparities that exist within the industry. Gender equality still remains a hotly disputed topic; and one that doesn’t make for easy reading once you delve into the statistics behind it. Although there has been a significant increase of women in non-executive positions within the FTSE 350, the majority of those in senior executive roles continue to be male. Women only make up 6% of the top CEOs in the UK – a FTSE 100 CEO is more likely to be named Stephen than to be a woman. This evidence is damning in what is perceived as a being a culturally diverse economy, and puts the wider issue of salary disproportion into perspective. 

As a reaction to CEO’s salaries, the CIPD and the High Pay Centre released their own recommendations on what could be done to reduce this imbalance at the top:

  • Pay for 1% of earners should be disclosed
  • Consider wider workforce reward practices, and understanding of organisational culture, fairness and investment in people
  • Link chief executive pay to both financial and non-financial measures of performance
  • Simplify chief executive reward packages and ensure they are linked to fewer and more meaningful measure of performance

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