Average worker would need to graft for 160 years to earn CEO's annual salary, research finds

Hot topic: Executive pay in London's financial district, known as the Square Mile
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Hatty Collier3 August 2017

The average worker would need to work for 160 years to be paid the annual salary of a company chief executive, a new report has revealed.

A "huge gap" remains between the pay of chief executives and other employees despite a fall in average executive pay in the past year, the study found.

An analysis of chief executives in FTSE 100 companies showed an average pay package of £4.5 million, down from £5.4 million in 2015.

It would take the average UK full-time worker on a salary of £28,000 (median full-time earnings) 160 years to earn what an average FTSE 100 CEO is paid in just one year, said the report.

The study, by the High Pay Centre think tank and the Chartered Institute of Personnel and Development (CIPD), also found there are just six women in the list, paid an average of £2.6 million, well below their male counterparts.

Stefan Stern, director of the High Pay Centre, said the fall in average executive pay followed political pressure and hostile public opinion.

He said: "The response has been limited and very late. It is also, so far, a one-off. We need to see continued efforts to restrain and reverse excess at the top, and we should beware the ratcheting up of pay lower down the FTSE league table as chief executives and remuneration committees 'chase the median'. This helps nobody but a few lucky top execs."

The pay ratio between FTSE 100 chief executives (CEOs) and the average wage of their employees was 129:1 last year, down from 148:1 in 2015, said the report.

The study also found that just over a quarter of firms in the FTSE 100 are accredited to the Living Wage Foundation, which recommends a higher living wage than the official figure.

Peter Cheese, chief executive of the CIPD, said: "We have to hope that the reversal in rising executive pay is the beginning of a re-think on how CEOs are rewarded, rather than a short-term reaction to political pressure.

"The fall in executive pay is a step in the right direction, but it's still happening within an overall reward system where average wages in the UK have been flat. Our analysis also shows a clear gender pay disparity at the top, with female CEOs receiving less than their male peers."

Business Minister Margot James said businesses should be run responsibly, including ensuring executive pay is properly aligned to performance as outlined in the Corporate Governance Reform green paper.

"This report shows encouraging signs that the UK's largest firms are already making progress in this area and our responsible business reforms, which we will publish shortly, will help to enhance the public's trust and confidence in big business."

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