UK bosses’ pay packets soar 10 per cent to over £5m but pay ratio narrows
The pay ratio between top bosses and their average employees has narrowed, according to new research published this morning.
Figures from the High Pay Centre show that the pay ratio dropped from 148:1 to 140:1 between 2014 and 2015, even though the typical pay packet of FTSE 100 chief execs jumped from £4.96m to £5.48m.
The data comes just weeks after new Prime Minister Theresa May launched a scathing attack on boardroom pay, and during a year in which shareholders have targeted the remuneration of several big-name chief executives.
Stefan Stern, the outspoken director of the High Pay Centre, slammed the “very slight easing” of the pay ratio as “still an extraordinary gap by historic standards”, adding it was not totally clear what had driven the closing of the gap.
Read more: UK's top shareholders to propose executive pay shake-up
However, Oliver Parry, head of corporate governance at the Institute of Directors, told City PM pay ratios read out of context could be misleading.
“A pay ratio for an investment bank is going to be small between the median employee salary and the chief executive whereas at [a supermarket], it’s going to be huge,” said Parry.
“But that doesn’t mean necessarily there’s a massive problem with the quantum of chief executives’ pay. It just means that they employ a different type of worker.”
Meanwhile the Prime Minister, who last month called the gap between top dog and worker pay “irrational, unhealthy and growing”, has already pledged various measures to make pay fairer, including forcing companies to make their pay ratios public and making shareholder votes on executive pay binding.
“The PM should call a high pay summit and listen to the key stakeholders on why the executive pay process has become uncontrollable and what can be done. Companies need to justify their ridiculous pay ratios in terms of their business models and begin a process of treating executive directors like any other employees for pay purposes,” a spokesperson for shareholder interest group Pensions & Investment Research Consultants (Pirc) added.
Read more: Martin Sorrell given bloody nose over pay
The High Pay Centre report highlighted areas where there was more work to be done, such as the lack of FTSE 100 companies which had been accredited by the Living Wage Foundation.
Travel giant TUI is the only FTSE 100 to have employee representatives on its board, something that May has also advocated and the Pirc spokesperson commented would help “reel in the excessiveness” of boardroom pay.
This year’s AGM season delivered a number of bloody noses to top bosses. In particular, shareholders were quick to show their anger over BP boardroom pay, with 59.29 per cent voting against chief executive Bob Dudley’s £14m deal.
“This government is committed to building an economy that works for all,” a spokesperson told City PM
“As part of this we want to see stronger shareholder oversight of executive pay and greater transparency including better reporting of bonus targets and pay ratios. As well as simplifying the way bonuses are paid so that incentives are better aligned with the long-term interests of the company and its shareholders.”