CEO pay soared by 11 per cent in the past year

UK unions describe the CIPD report about soaring executive pay as illustrating "shocking excess" in Britain's boardrooms.

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Chief executives in the UK's leading companies have seen their pay soar by 11 per cent in the past year - five times greater than the rises awarded to full-time workers, according to a report on Wednesday.

Women comprise just seven percent of FTSE 100 CEOS

Although CEO median salaries now stand at almost £4 million, women were found to comprise just seven per cent of FTSE 100 chief executives and accounted for only 3.5 per cent of the total CEO pay bill.Unions described the report, compiled by the Chartered Institute of Personnel and Development (CIPD) and the High Pay Centre, as illustrating the "shocking excess" in Britain's boardrooms. The median pay for FTSE 100 chief executives was £3.93 million over the past year, up from £3.53 million.Publication of the report coincided with figures from the Office for National Statistics showing that the Consumer Price Index measure of inflation rose to 2.5 per cent in July, a tenth of a point higher than in June and the first the first increase since last November.Research by CIPD showed the 'mean measure' of CEO salaries, which was well above £5 million, was distorted this year by large pay rises to chief executives at builders Persimmon, where Jeff Fairburn was paid £47.1 million, and Melrose Industries, where Simon Peckham received £42.8 million, 43 times the amount he got in 2016.

Peter Cheese, chief executive of the CIPD, comments on the CEO results

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."Luke Hildyard, director at the High Pay Centre, added: “It is deeply unsettling that such a substantial pay gap remains between CEOs and ordinary workers. How pay is distributed within organisations has a big effect on living standards, and by many measures the UK is one of the most unequal countries in Europe.“Big CEO pay increases reflect poorly on corporate culture and accountability and suggest that bolder reforms to corporate governance may be needed.”

Recommendations in the CIPD report included:

  • the immediate introduction of the pay ratio reporting requirement, which is not due to come into force until next year.
  • a requirement on companies to provide clearer information about wider pay distribution within their organisations.
  • a review by policy-makers and companies to see if existing remuneration reports can be simplified to ensure they can be easily scrutinised 
  • a stronger emphasis on remuneration committees and shareholders on ensuring CEO reward is aligned with pay practices throughout the organisation.
The report also said remuneration committees should ensure that CEO performance is assessed by non-financial as well as financial measures, including investment in workforce training and development and indicators of employee satisfaction and well-being.

Frances O'Grady, general secretary of the TUC, comments on UK CEO pay

Frances O'Grady, general secretary of the TUC, commented: "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 Department for Business 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."
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