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Executive Pay Increases

The High Pay Centre (an independent non-party think tank established to monitor pay) published its annual survey on earnings at FTSE 100 companies earlier this month. The survey confirmed that bosses of Britain’s largest public companies earned an average of £5.5 million last year, and benefited from a 10% pay increase. Earnings in the rest of the economy lagged well behind with wages of average workers raising by 2% in 2015. For the second year running, Sir Martin Sorrell topped the high earners league for 2015 receiving £70m.

It is thought that leading company bosses now typically earn 129 times more (including pensions and bonuses) than their employees. Stefan Stern, the Centre’s director stated: “In spite of the occasional flurry from more active shareholders, boards continue to award ever larger amounts of pay to their most senior executives.”

Legal & General Investment Management’s annual corporate governance report, which came out earlier this year, predicted that pay ratios between chief executives and their average employees would be a “hot topic” in 2016. The issue was even addressed by now Prime Minister, Theresa May, who made boardroom reform a central pillar of her campaign to become leader of the Conservatives.

May promised to make shareholder votes on pay not just advisory but binding and called for all listed companies to publish the ratio between chief executive and average worker pay. May also noted that under her leadership, employees would have a seat in the boardroom alongside company directors.

May’s proposals, should they come to fruition, would signify a huge culture shift. At present, just one FTSE 100 company has employee representatives on its board and none publish their chief executive to employee pay ratio.

Britain’s top paid CEOs in 2015:

  • Sir Martin Sorrell, WPP, £70.416m
  • Tony Pidgley, Berkeley Group, £23.296m
  • Rakesh Kapoor, Reckitt Benckiser, £23.190m
  • Jeremy Darroch, Sky, £16.889m
  • Flemming Ørnskov, Shire, £14.638m
  • Bob Dudley, BP, £13.296m
  • Erik Engstrom, Relx, £10.869m
  • Mike Wells, Prudential Financial, £10.031m
  • Michael Dobson/Peter Harrison, Schroders, £8.905m
  • António Horta Osório, Lloyds Group, £8.773m