Anger as report reveals chief executives’ pay increased by 11% in past year

Anger over pay rises for chief executives (Victoria Jones/PA) Credit: PA Wire/PA Images

The pay of company chief executives has soared by 11% in the past year, with median salaries of just under £4 million, a new study reveals.

The rise compares to 2% for full-time workers and is despite criticism from investors over excessive payments.

Unions said the figures exposed the “shocking excess” in Britain’s boardrooms.

Research by the Chartered Institute of Personnel and Development (CIPD) and the High Pay Centre among the pay packages of chief executives in FTSE 100 firms showed median pay rose by 11% in the past year.

Under the “mean” measure, which is more affected by this year’s very large payouts to chief executives (CEO) at Persimmon and Melrose Industries, pay rose by 23% to £5.6 million, said the report.

Women make up 7% of FTSE 100 chief executives but earn 3.5% of total pay, said the report.

Peter Cheese, chief executive of the CIPD, said:  “Despite increased investor activism and the planned introduction of pay ratio reporting, the evidence suggests that very little is changing when it comes to top pay in the UK.

“It’s 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.

“Given the ongoing issues of trust in big businesses and a push for greater transparency, it really is time businesses and boards put greater scrutiny on high pay, and that they think much more objectively about what they are rewarding CEOs and how.”

Rachel Reeves, who chairs the Business, Energy and Industrial Strategy Committee, said: “Excessive executive pay undermines public trust in business. When CEOs are happily banking ever larger bonuses while average worker pay is squeezed, then something is going very wrong.

“Recent revolts on pay awards show that shareholders are increasingly sharing this frustration at unjustifiable pay awards. Executive pay must match performance.

“If Boards and Remuneration Committee chairs are so out of touch they are prepared to waive through off-the-scale reward packages, then shareholders must strike back and hold them to account. If businesses don’t step up on executive pay, then Government will need to step in.”

Luke Hildyard, director of the High Pay Centre, said: “It is deeply unsettling that such a substantial pay gap remains between CEOs and ordinary workers.

“Big CEO pay increases reflect poorly on corporate culture and accountability and suggest that bolder reforms to corporate governance may be needed. In this light, the weakening of plans to give workers representation on company boards could be misguided.”

Tim Roache, GMB General Secretary, said: “These figures expose shocking excess in UK company boardrooms.

“We live in a country where company fat cats get paid 400 times more than the dedicated, hard-working carers who look after our nearest and dearest.

“Not to mention hundreds of times more than those who keep our streets clean, or ambulance workers who save lives.

“The fact that FTSE 100 CEO pay is rising five times faster than average wages is a badge of national shame.”

John McDonnell, shadow chancellor, said: “Most people’s wages are still below 2010 levels and are barely keeping up with inflation.

“So when they see the fattest cats get fatter yet again with an 11% pay rise, it’s no wonder people question the fairness of our society.”

TUC general secretary Frances O’Grady said: “Pay for most people is barely rising at all. So working people will find it hard to understand why fat cat executives are splashing the cash for themselves.

“Workers should get seats on boardroom pay committees to bring a bit of common sense to pay decisions.

“And the Government should put the minimum wage up to £10 an hour to give more workers a fairer share of the wealth they create.”

A Business Department spokesman said: “While most companies get their responsible business practices right, we understand the anger of workers and shareholders when bosses’ pay is out of step with company performance.

“That is why as part of our corporate governance reforms, the UK’s largest companies now have to ensure employees’ interests are represented in the boardroom and annually publish and explain the pay ratio between senior management and the workers.

“These upgrades are making boards more accountable while enhancing our reputation as one of the best places in the world to work, invest and do business.”

Unite general secretary Len McCluskey said: “These figures show that it is business as usual in Britain’s boardrooms.

“It is 10 years since the casino bankers crashed the economy but nothing has changed. Excess in the City is alive and well.”