Ethical Performance
inside intelligence for responsible business


Radical action urged over executive pay levels

August 2014

Radical action by the UK government to cap executive earnings has been urged by the High Pay Centre.

The centre, an independent think tank that monitors executives’ remuneration, recommends the limit should be a multiple of the wages received by the lowest-paid employee in a business.

The centre makes the proposal in a report showing that executive pay has ballooned from 60 times that of the average for UK employees in the late 1990s to a multiple of nearly 180 today.

The report says average pay for a FTSE 100 chief executive jumped from £4.1m to £4.7m ($7m to $8m, €5.2m to €5.95m) between 2012 and last year.

By contrast, average pay in the UK across the board, recorded by the government’s Office for National Statistics, was £26,500.
The three highest-earning chief executives were Sir Martin Sorrell, of the advertising group WPP, with a total package of nearly £30m, Donald Robert, of the financial investment consultancy Experian, with £10.1m, and Tidjane Thiam, of the insurance and financial services multinational Prudential, with £8.6m.

The centre observed that shareholders still backed large payments even though the government ruled last year that executive remuneration must have 50% approval from them.

Nevertheless, 28% of WPP’s shareholders opposed Sir Martin’s pay package at the annual meeting in June, and the £10m package put up for Christopher Bailey, the Burberry fashion company’s new chief executive, was voted down by 53% at the annual meeting in July. Eventually, Bailey was given a £1.1m salary with large pension and share benefits.
Deborah Hargreaves, the centre director, said: “It’s time to get serious about tackling the executive pay racket. The government’s tinkering won’t bring about a proper change in the UK’s pay culture.

“We need to build an economy where people are paid fair and sensible amounts of money for what they do and the incomes of the super-rich aren’t racing away from everybody else.

“A maximum pay ratio would recognise the important principle that all workers should share in a company’s success and gaps between those at the top and low and middle earners cannot just get wider and wider. The idea must now be properly debated.”
Other proposals in the report were that workers should be represented on company boards, remuneration committees and regulating bodies, and that employees should share profits.

The centre warned that the threat of widening inequality could cause political and economic stability.

UK & NI Ireland | Executive pay

3BL Media News
Sign up for Free e-news
Report Alerts
Job Vacancies
Events Updates
Best Practice Newsletter