‘Shocking’ wage gap reaches 140 times average salary; CIPD chief executive Peter Cheese points to perceptions of unfairness
Bosses in publicly listed companies saw their pay rise by 10 per cent in 2015, according to a new report that highlights a “shocking disconnect between pay for those at the top and the rest of the workforce”.
FTSE 100 CEOs earned an average of £5.48m in 2015 – up from £4.96m a year earlier – which meant chief executives were paid 140 times more than the average employee, revealed the report from the High Pay Centre. In 2010, CEO pay was around £4.1m.
The average weekly wage grew by 1.9 per cent last year according to official figures from the Office for National Statistics (ONS). In contrast to the ‘generous’ pay packages awarded to executives, only a quarter of FTSE 100 firms are accredited by the Living Wage Foundation for paying the voluntary living wage to their employees.
Peter Cheese, CIPD chief executive, said: “Not only is there a shocking disconnect between pay for those at the top and the rest of the workforce at large, but, worse still, this gap is continuing to grow despite our latest data showing it leads to a real sense of unfairness with a clear impact on employee motivation.”
A recent CIPD study showed that 59 per cent of employees say high levels of CEO pay in the UK is directly demotivating to them at work. “The message from employees is clear: ‘The more you take, the less we’ll give,’” added Cheese. “This kind of culture in the workplace is bad for both employers and employees. When pay for those at the top is not linked to either personal performance or business outcomes, it undermines trust in business, not just from employees but from customers and other stakeholders.”
Stefan Stern, director of the High Pay Centre, said: “There is apparently no end yet in sight to the rise and rise of FTSE 100 CEO pay packages. In spite of the occasional flurry from more active shareholders, boards continue to award ever larger amounts of pay to their most senior executives.”
The High Pay Centre accepted that a few large increases skewed this year’s figures, with median CEO pay rises at 2 per cent. But the figures will add further fuel to an ongoing debate about excessive pay awards; prime minister Theresa May highlighted the issue in her leadership campaign, calling the pay gap “irrational and unhealthy”.
Stern said: “The High Pay Centre was delighted by Theresa May’s recent intervention on this issue. There now seems to be political will and momentum behind attempts to reform top pay. In particular we support two of her main proposals: that companies should be obliged to publish the ratio between the pay of the CEO and the average worker in the business, and that the voice of the ordinary employee must be heard in discussions over executive pay.
Cheese said the CIPD welcomed greater employee involvement, as well as calls to publish pay ratios: “Publishing this data will serve to encourage accountability and force a greater focus on senior pay among key stakeholder groups, such as investors who can help to drive change and hold businesses and senior individuals to account.”
But he called for more to be done. “We also need to see more action from the top – either from boards or more chief executives themselves taking a public stand and putting a stop to these inexplicably high salaries and bonuses,” he added. “As we head into an uncertain economy, this can only become a more pressing issue.”
Calls are also being made for pay to be linked much more closely to performance. Recent data from the Chartered Management Institute found 43 per cent of managers rated as ‘underperforming’ still took home bonuses in the past year.
Story via – http://www.cipd.co.uk/pm/peoplemanagement/b/weblog/archive/2016/08/08/top-ceos-received-10-per-cent-pay-rise-last-year.aspx