Fat Cats have the cream of the wages this Wednesday
It’s Fat Cat Wednesday. After just two and a half days Britain’s top bosses will have made more money than the average UK worker earns in an entire year, according to High Pay Centre calculations.
The figures show that pay for top company executives returning to work this new year will pass the UK average salary of £28,200 by around mid-day on “Fat Cat Wednesday”.
After a year in which “elites” were criticised for being out of touch and ignorant about the concerns of ordinary people, these pay gap figures confirm that there are dramatically different rates of pay at the top compared with what everyone else receives.
Median FTSE100 CEO pay in 2015 was £3.973 million. The High Pay Centre found that even if CEOs are assumed to work long hours with very few holidays, this is equivalent to a rate of pay of over £1,000 an hour. The “national living wage” for over 25s is £7.20 an hour.
High Pay Centre director, Stefan Stern, said, “Our new year calculation is not designed to make the return to work harder than it already is. But ‘Fat Cat Wednesday’ is an important reminder of the continuing problem of the unfair pay gap in the UK. We hope the government will recognise that further reform to pay practices are needed if this gap is to be closed. That will be the main point in our submission to the business department in its current consultation over corporate governance reform.
“Reality check” needed
“Effective representation for ordinary workers on the company remuneration committees that set executive pay, and publication of the pay ratio between the highest and average earner within a company, would bring a greater sense of proportion to the setting of top pay,” Stern added.
Responding to the High Pay Centre release, Ben Willmott, head of Public Policy at the CIPD, said, “There is still a shocking disconnect between the pay for those at the top and the rest of the workforce at too many FTSE companies, despite efforts to rein in executive pay in recent years.
“The situation is likely to get worse before it gets better as higher inflation in 2017 will mean many frontline workers will face a pay squeeze at a time when FTSE 100 CEO pay is already 129 times that of the average employee.
“This disconnect demotivates staff at work, with a recent CIPD study showing that six in ten (59%) employees identify CEO pay as an issue that demotivates them at work. The message from the workforce is clear: ‘the more you take, the less we’ll give’. Business leaders need to ensure there is a is a much clearer link between overall top pay, organisation performance and the rewards of the wider workforce or risk reducing employee engagement and productivity at work.
“Government can also play a role in helping to provide more transparency over chief executive pay by requiring companies to publish the pay ratio between what the chief executive earns and median pay in their organisation. This will help place more scrutiny on whether top pay is proportionate to the performance of the business and improve overall fairness in organisations, at a time when many pay packets are being squeezed.”
The huge increase in top pay in recent years seems to have arisen because of so-called “performance-related pay” awards. But as new research from Lancaster University Management School has revealed, the link between pay and performance has in fact been “negligible”:
Pay is not just a FTSE100 company problem, the High Pay Centre says. AIM-listed Asos is being criticised today by the GMB union for a similar vast gap in pay created by the chief executive’s “Long Term Incentive Plan”.
Excessive private sector pay deals set a bad example to some public sector and not-for-profit organisations, as controversy over the pay for some university vice chancellors, school “superheads”, NHS Trust chief executives, local authority leaders and some charity bosses suggests.
The continuing pay gap creates problems for us all, stressed the High Pay Centre.
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