CEO pay at top companies rises by 11%

Money Benefits

 

CEO pay packages released today shows that CEO median pay rose by 11% between 2016 and 2017, despite prominent criticism of excessive CEO pay awards in the past year, according to a new report.

The research from the CIPD, the professional body for HR and people development, and the High Pay Centre, the independent think tank for pay and governance, has found that FTSE 100 CEO median pay now stands at £3.93 million per year, an increase on £3.53 million in 2016.

This year’s analysis is affected by two very large payouts for the CEOs at Persimmon and Melrose Industries (£47.1 million and £42.8 million respectively). As a result of this, the annual report leads this year with the median, rather than the mean figure. Using the median measure of CEO remuneration reduces the impact of these two outliers, but it still shows an increase in earnings of 11%, compared to the 2% rise in median pay enjoyed by full-time workers over this period.

However, if the mean measure is used, then it shows that CEO mean pay across all FTSE 100 companies has increased by 23% over the same period, from £4.58 million in 2016 to £5.66 million in 2017. Excluding Persimmon and Melrose Industries from the analysis would see the 2017 mean CEO single figure fall from £5.66 million to £4.85 million. However, this is still higher than last year’s overall mean figure of £4.58 million by 6%, showing this continued underlying trend of rising executive pay.

Further highlights from this year’s CIPD and High Pay Centre analysis include the fact that, as a FTSE 100 CEO, you are as likely to be named David or Dave, or Stephen or Steve, as you are to be a female CEO. Just seven FTSE 100 CEOs are women, an increase from six in 2016 and five in 2015.

The report says that, at the current rate of one new female CEO each year, it will take another 43 years for women to make up 50% of the FTSE 100 CEOs. Moreover, it finds that, while women make up 7% of FTSE 100 CEOs, they earn just 3.5% of total pay. Only 34 companies in the FTSE 100 are accredited by the Living Wage Foundation for paying the living wage to all their UK-based staff.

Transparency

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. However, pressure is building in the system.

“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. Financial performance alone does not signify CEO success, and must be balanced with development of the organisations long-term sustainability and value. Investors and boards need to look beyond share price, and consider a much broader range of indicators that show how that individual is performing for the long-term good of the business, its workforce and other stakeholders.”

Rachel Reeves MP, and chair of the Business, Energy and Industrial Strategy Committee, said executive pay should match performance. She added: “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.”

The CIPD and the High Pay Centre found that the majority of CEO pay packages come from variable pay, with just 16% of total remuneration being represented by base salary (a fall from 20% in 2017). This is largely due to an increase in the use of long-term incentive plans (LTIPs) which represent 56% of total pay, an increase from 48% last year.

The increased use of LTIPs comes despite the fact that many respondents to the Government’s Green Paper on Corporate Governance “expressed concern that LTIPs are not adequately aligning executive remuneration with long-term company performance.”

The CIPD and the High Pay Centre made the following recommendations:

    • Rather than waiting for the pay ratio reporting requirement to come into force in 2019, companies should introduce it immediately, supported by a clear narrative.
    • Companies should provide clearer information about wider pay distribution within their organisations.
    • Policy-makers and companies should review whether existing remuneration reports can be reduced in length and complexity to ensure they can be easily scrutinised
    • Remuneration committees and shareholders should place stronger emphasis on ensuring CEO reward is aligned with pay practices throughout the organisation.
    • 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.
    • HR professionals have a vital and critical role to play in influencing remuneration committees and must ensure that senior leaders receive and act on the insights from pay data, appreciating the various ways that reward can incentivise and affect behaviours and performance across the workforce.

Women at the top

Commenting on the figures on women and the lack of women at the top of organisations, Suzanne Tanser, Pay & Reward expert at HR consultancy Croner, said: “Despite the target set by the Hampton-Alexander Review in 2011, which instructs that 33% of all senior positions within FTSE companies should be held by women in 2020, male dominated boardrooms continue to be the norm with organisations. A method for counteracting this is exploring incentives within companies that can encourage female employees to progress.

“This includes actively placing women in key decision making positions, establishing foundations where promising female members of staff can engage with existing directors and addressing any evidence of unconscious bias. Employers should also bear in mind that gender pay gap reports must be publically submitted every April, within which they must clearly demonstrate steps taken to reduce the gap in average earnings between male and female workers.”





Post a comment

Your email address will not be published. Required fields are marked *

Your Franchise Selection

Click the button below to register your interest with all the franchises in your selection

Request FREE Information Now

Your Franchise Selection

This franchise opportunity has been added to your franchise selection

image

title

Click the button below to register your interest with all the franchises in your selection

Request FREE Information Now


You may be interested in these similar franchises