Pay for UK’s top bosses climbs 11%

Date published: 14 August 2018

Hannah Murphy

The chief executives of the UK’s biggest listed companies received an 11 per cent raise last year pushing their median pay up to £3.93m, according to a report which found that full-time workers received a 2 per cent rise over the same period.

The figures for FTSE 100 bosses include base salary, bonuses and other incentives and have been revealed at a time of growing shareholder activism over big payouts. Shareholders at companies including BT, Royal Mail and WPP have rebelled against chief executive pay at stormy annual investor meetings this year.

The UK government has announced some action to try to address unequal corporate pay — from 2020, large UK listed companies will be required to publish and justify the pay gap between chief executives and staff, and spell out to investors the impact of future share price rises on executive pay.

“Excessive executive pay undermines public trust in business . . . Recent revolts on pay awards show that shareholders are increasingly sharing this frustration at unjustifiable pay awards,” said Rachel Reeves, the Labour MP who chairs the business, energy and industrial strategy committee, which is leading an inquiry on fair pay.

“If businesses don’t step up on executive pay, then government will need to step in,” she added.

Andrew Ninian from the Investment Association, a trade body for investment managers said: “FTSE 100 companies need to do more to ensure pay rewards align with company performance and remain at levels that are justifiable to shareholders.”

Peter Cheese, chief executive of the Chartered Institute of Personnel and Development, which produced the report with the High Pay Centre think-tank, said it was “disappointing to see that CEO pay has held up in the face of increasing pressure when average pay across the workforce . . . has barely shifted in recent years”. But “pressure is building in the system,” he said.

The highest-paid chief executive in 2017 was Jeff Fairburn at housebuilder Persimmon who received £47.1m, or 22 times his 2016 pay. Ranking second, Simon Peckham of turnround specialist Melrose Industries banked £42.8m, equal to 43 times his 2016 pay, according to the analysis.

Those two huge payouts meant that on a mean rather than a median basis, FTSE 100 chief executives received a 23 per cent pay rise in 2017 to £5.66m.

In both cases, the executives benefited from long-term incentive plans (LTIPs), complex multiyear packages that critics say are too generous without being well aligned with company performance.

The CIPD report found that LTIPs are becoming an increasingly common part of executive pay, accounting for 56 per cent of total pay in 2017, up from 48 per cent the previous year.

The analysis showed the mean pay ratio between FTSE 100 bosses and their employees was 145:1, up from 128:1 in 2016.

It also reported on a gender pay gap at the top: while women make up 7 per cent of FTSE 100 chief executives, they account for only 3.5 per cent of total pay.

A study by Minerva Analytics published in June looked at slightly different metrics and reported an average pay rise of 18 per cent for FTSE 100 bosses last year.

Source: FT.com

Link To FT.com: https://www.ft.com/content/609ee2b6-9fc4-11e8-85da-eeb7a9ce36e4

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