Hello 2018: By Today FTSE 100 CEO Earnings = An Average Annual UK Salary
There's no fairness in extreme disparities in pay within a society, and its culture is inevitably reflected in the productivity of its workforce. Today, on the first Thursday of the year, the average FTSE 100 CEO will already have been paid what it will take the typical UK worker all year to earn, calculations from the independent think-tank the High Pay Centre and CIPD, the professional body for HR and people development reveal.
The figures show that pay for top executives will pass the median UK gross annual salary of £28,758 for full-time employees today - January 4, 2018.
While we talk of 'fat cats' and 'top dogs' and even 'pigs in troughs' to illustrate a point, the real picture is all too human. As Britain wrestles with the implementation of its decision to leave the European Union, it is this human resource the country needs to rely on for the greatest possible chance of success. Such flagrant inequality flies in the face of any attempt at social cohesion.
Efforts are being made to ensure that high pay is addressed as part of a much broader re-think of corporate governance, with government reforms and the current review of the UK Corporate Governance Code by the Financial Reporting Council (FRC).
The mean FTSE 100 pay packet has fallen by a fifth, from £5.4m to £4.5m, says the research. FTSE 100 CEO median pay also fell to £3.45m in 2016 (down from £3.97m in 2015).
"However, despite this year-on-year reduction in total pay among FTSE 100 bosses, the ratio of CEO pay to the pay of the average full-time worker stands at 120:1" point out the CIPD and the High Pay Centre.
Ratios matter in a country that appears to be struggling to reinvent itself.
"When considering executive and employee pay, reward decisions must be principles-led, evidence based and outcome-driven.....Executive pay should also be considered alongside how the wider workforce is being rewarded. In a year when real earnings will have fallen for many, excessive reward at the top will be strongly felt by the rest of the workforce" said Charles Cotton, Senior Reward and Performance Adviser at CIPD.
Previous CIPD research has shown that excessive CEO pay can have a damaging effect on the workforce.
“Workers 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" said Frances O'Grady, General Secretary of the Trades Union Congress (TUC) in response to today's figures.
Stefan Stern, director of the High Pay Centre, described the gaps between the top of business and the rest of the workforce as "grossly excessive" and "unjustifiable."
As part of the UK Government's reforms, new laws will require around 900 listed companies to annually publish and justify the pay ratio between chief executives and their average worker. "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" said Mr Stern.
The reforms also include the introduction of the world’s first public register of listed companies where more than a fifth of investors have objected to executive annual pay packages. The first public register was published by the Investment Association on December 19 2017 .
It includes more than a fifth of the FTSE 100, including fashion label Burberry, retailers Sports Direct and Morrisons, broadcaster Sky and the advertising company WPP.
Joining the dots between executive pay and the rebuilding of a cohesive, productive and fair society a decade after the financial crisis was never going to be easy in a country that is historically very elitist and remains so, in many ways. But Britain is not the only country to have astronomic levels of CEO pay.
Canada's 100 top paid CEOs made more than 200 times the income of the "ordinary worker" in 2016, with CEO pay the highest it had been since 2008, according to the Canadian Centre for Policy Alternatives.
The CIPD's research in 2015 found that 60% of employees found pay levels in the UK to be "demotivating", giving some clear hints on one possible reason for poor productivity levels.
It is also true that examining boardrooms reveals an astonishing lack of diversity, and a curious lack of innovation, an indication of a desire to hang onto the way things have always been done - including recruiting from outside for the top roles.
I listened to Simon Patterson of Pearl Meyer, the executive compensation consulting firm, arguing for better succession planning and recruitment from within businesses on BBC Radio 4 Today (1:16:34) earlier this week. He stated then that it would help to break a locked-in cycle of executive pay that has plateaued, and also bring up younger talent. Since then, I found his blog on the subject, which is here.
British business has taken its time to adapt in many ways to change - from the need for diversity to the challenges of cybersecurity and technological transformation, all covered by me on Forbes for four years. Along the way, it has been nudged and coaxed by government reviews and initiatives.
Now it is feeling the shudders of a widespread refusal to continue to tolerate 'us and them' as a status quo. It is evident across the board - from the reactions to the tragedy of the Grenfell Tower to changing daily consumer shopping habits that shun old retail business models and their assumptions.
Executive pay levels are about far more than pay, and it would be foolish to pretend they are going to go away as a critical issue.