Executive pay fell last year but top bosses will still have made more money in three days than the typical worker earns in a year, new figures reveal.
The mean pay of chief executives in FTSE 100 companies fell by a fifth from £5.4 million to £4.5 million – 120 times more than an average full-time worker, a slight drop on the ratio of 122-1 in the previous year.
Today was dubbed Fat Cat Thursday, as the pay of top executives will pass the median annual salary of £28,758 for employees.
The High Pay Centre think tank and the Chartered Institute of Personnel and Development (CIPD) said there had been “modest” restraint by company boards but the pay gap between the top and average workers remained wide.
All listed companies will have to publish the pay ratio between bosses and workers under new corporate governance reforms this year.
Stefan Stern, director of the High Pay Centre, said: “While it was encouraging to see a tiny amount of restraint on pay at the top of some FTSE 100 companies last year, there are still grossly excessive and unjustifiable gaps between the top and the rest of the workforce.
“Publishing pay ratios will force boards to acknowledge these gaps. We look forward to working with business and government to make this new disclosure requirement work as effectively as possible.”
Peter Cheese, chief executive of the CIPD, said: “The drop in pay in the last year is welcome but will have largely been driven by the Prime Minister’s proposed crackdown on boardroom excess.
“It’s crucial that the Government keeps high pay and corporate governance reform high on its agenda, but we also need business, shareholders and remuneration committees to do their part and challenge excessive pay. We need a radical rethink on how and why we reward chief executives, taking into account a much more balanced scorecard of success beyond financial outcomes and looking more broadly at areas like people management.
“The current review of the UK Corporate Governance Code provides a great opportunity to broaden the remit of remuneration committees to ensure that there is much more focus on the wider workforce and employee voice when decisions on chief executive pay are being made, to improve fairness and transparency.”
The study of company annual reports found that Sir Martin Sorrell, chief executive of advertising giant WPP, was the highest paid boss for the second year, although his total pay fell from £70.4 million to £48.1 million.
He was followed by Arnold Donald of cruise company Carnival (£22 million), Rakesh Kapoor of consumer goods company Reckitt Benckiser (down from £23.1 million to £14.6 million), Pascal Soriot of pharmaceutical firm Astrazenica (£13.3 million) and Erik Engstrom of information firm Relx (£10.5 million).
Rebecca Long Bailey, shadow business secretary said: “It’s a shocking sign of just how out of control inequality has grown that top CEOs have already been paid in three days what most people earn in an entire year. The Tories are making it worse, with pay falling for the majority and further tax giveaways at the top.
“The next Labour government will tackle rampant pay inequality with a Real Living Wage of at least £10 per hour, with an excessive pay levy and by rolling out maximum pay ratios of 20:1 in the public sector and in companies bidding for public contracts.”
TUC General Secretary Frances O’Grady said: “Worker are suffering the longest pay squeeze since Napoleonic times, but fat cat bosses are still getting salaries that look like telephone numbers.
“The Government needs a plan to make the economy fair again. Workers should be given seats on pay committees to bring some common sense and fairness to boardroom pay and the minimum wage should be put up to £10 an hour as quickly as possible.”