Excessive executive pay threatens British business, say business leaders

Survey from the Institute of Directors says public anger over excessive pay is a threat to business

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Public anger over exorbitant executive pay is the greatest threat to trust in British business, according to business executives themselves.

A new survey of the Institute of Directors, commissioned by the High Pay Centre thinkthank, found that more than half of the country's company directors believe 'anger over senior levels of executive pay' is a threat to public trust in enterprise, a greater proportion than those that blamed unsympathetic media coverage and the mistrust of goods and services.

Two years ago company shareholders were able to veto proposed pay packages for executives, but recent revelations that big bank bosses from HSBC and Lloyds were paid north of £8 million last year has restoked the flames of public indignation.

Deborah Hargreaves, Director of the High Pay Centre, said that outrage extends to other members of the business community: "Outside the boardrooms of big corporations, ordinary small and medium-sized business owners are as appalled by the culture of top pay as anybody else."

These five charts, most of which use data from the IoD survey, reveal why excessive executive pay is a problem.

It threatens business

As stated above, 52 per cent of 1,000 business leaders surveyed on behalf of the High Pay Centre expressed fear that public anger over the size of salaries for FTSE 100 CEOs (estimated to be 160 times that of the average UK worker) could damage trust in the business sector.

Trust is important

Just under half of respondents said public trust is vital or somewhat important for business wellbeing. Perhaps just as striking is the 26 per cent that say public trust in business hasn't any bearing to the sector's success.

Personal pay shouldn't be the driving force

Only 13 per cent of those polled by the IoD said 'financial reward' is be the important motivation for executive performance. Building a successful company is seen as a far bigger driver.

Business wants bonuses

Ultimately though, despite fears over exorbitant pay damaging public trust, and a belief that building a business is more important that personal financial reward, the consensus from the IoD survey is that performance pay is good, that it improves company performance.

Look how much they get paid

The stats for this graph are taken from a study by the High Pay Centre in August last year of FTSE 100 CEO pay. I couldn't include the company with the greatest salary discrepancy - WPP - because it meant average worker pay wouldn't be visible.

That CEO's pay is 780 times that of his average employee, whilst the next-best from Next has compensation more than 450 times that of his average worker.