Average pay for a chief officer of a FTSE 100 company has reached the highest level on record – but is high executive pay actually harming UK businesses?

Have a look at the press release from the High Pay Centre:

The pay of the CEOs of Britain’s biggest companies increased by 2.2% in 2023.

Median pay for a FTSE 100 CEO increased from £4.1m in 2022 to £4.19m in 2022. This is the highest level of FTSE 100 CEO pay on record, although the growth in CEO pay levels are slower than in the past two years, when there was post-pandemic bounce.

Mean FTSE 100 pay grew from £4.42 million to £4.98 million – a 12.2% and over £500k increase.

Our research shows that the median FTSE 100 CEO is now paid 120 times the median UK full time worker, down from 124:1 in 2022, but still higher than 108:1 in 2021.

Other key findings include:

• Mean FTSE 100 pay grew from £4.42 million to £4.98 million – a 12.2% and over £500k increase
• FTSE 100 firms spent £755m on the pay of 222 executives.
• The number of FTSE 100 companies awarding eight-figure pay packages of over £10m more than doubled, from four firms in 2022 to nine in 2023
• 81% of FTSE 100 companies paid their CEO a Long Term Incentive Payment (LTIP), an increase on the 74% who did in 2022. The mean LTIP payment increased from £1,791k in 2022 to £2,058k in 2023.
• In total, twelve female CEOs served for at least part of the year, with eight of those remaining at the end of the financial year. Just six companies had female leadership for the entire financial year, with their median pay amounting to £2.69 million.
•  For companies who had a male CEO for the whole financial year, the median pay was £4.19 million – the same as the overall median pay for the FTSE 100.

The report argues that excessive spending on top earners by leading firms makes it harder to fund pay increases for the wider UK workforce. Reforms to regulations affecting corporate pay-setting process that the Government should consider include:

• Requirements for companies to include a minimum of two elected workforce representatives on the remuneration committees that set pay;
• Requirements for companies to provide more detailed disclosure of pay for top earners beyond the executives, and low earners including indirectly employed workers, enabling more informed pay negotiations at individual companies and a clearer debate about pay inequality more generally;
• Stronger trade union rights, including reasonable access to workplaces and a ban on efforts by management to manipulate votes on union recognition.

The argument for pay that can rise to more than 100 times that of members of the workforce is that the UK’s firms are competing with companies across the world for top talent.

But do huge amounts of cash actually buy top talent?

This Writer would say it doesn’t.

If you offer somebody a huge amount of money to sit at the top of a monolithic global concern, they’re bound to take it – sure – but what are they going to do?

They’re going to decide that it’s doing fine and change very little, and they’re going to react – probably badly – to external changes when they happen. This could lead to disaster, with the firm failing to adapt to a changing environment adequately or in time.

The High Pay Centre advocates that chief officer pay should not rise higher than 20 times more than that of the lowest workers.

This would attract people who would actually have a stake in the firm’s success; their own prosperity would depend on that of the business they have joined.

Also, the pay that would have been paid – most likely to a greedy do-nothing – could be shared among the workforce, making everybody happier.

And a happy workforce is productive.

So we return to the question: is high executive pay actually harming UK businesses?

I would say that it is. Let’s change it for the better.

Source: FTSE 100 CEO pay reaches new high • High Pay Centre

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