August 15, 2016

Top UK executives received 10% pay rise in 2015

The CEOs of the largest public companies in the UK received an average pay increase of 10% last year, according to the latest report from the High Pay Centre think tank.

According to the report, the average pay for chief executives of companies listed on the FTSE 100 was £5.5 million in 2015, up from £4.96 million the year before.

In contrast, the average UK worker’s pay increased by 2% in 2015, according to official figures. The High Pay Centre estimates that the average pay ratio between top CEOs and their employees is now 129:1, taking into account bonuses and pension contributions.

Stefan Stern, director of the High Pay Centre, commented that: “There is apparently no end yet in sight to the rise and rise of FTSE 100 CEO pay packages. In spite of the occasional flurry from more active shareholders, boards continue to award ever larger amounts of pay to their most senior executives.”

He added that the High Pay Centre supports proposals from new UK prime minister Theresa May to oblige companies to publish the ratio between the pay of their CEO and that of their average employee, and to introduce employee representation on company boards.

In July, May remarked that: “There is an irrational, unhealthy and growing gap between what these companies pay their workers and what they pay their bosses.”

Last year, the US Securities and Exchange Commission voted to force larger companies to disclose the gap in pay between their CEO and average worker, with effect from 2017.

Michael Bognanno has written for IZA World of Labor about CEO compensation. He writes that: “Although empirical evidence of effectiveness is lacking, measures that enhance the transparency of compensation packages, strengthen the shareholder voice on pay issues, and limit the CEO’s freedom to exercise stock options might help move CEO pay toward just levels.”

The High Pay Centre report can be accessed here.

Related articles:
Efficient markets, managerial power, and CEO compensation by Michael L. Bognanno
Market competition and executive pay by Priscila Ferreira
Find more IZA World of Labor articles on wage setting here