The Coalition’s efforts to crack down on the worst excesses of boardroom pay are having little impact and companies are flouting the spirit of the new regulations, according to the High Pay Centre.
The independent think-tank, a campaigner to cut the income gap between the super-rich and the rest of the workforce, analysed the pay of 67 FTSE 100 chief executives since new rules giving shareholders a binding vote on future pay policy came into force last October. It found that the average pay awarded in 2013 was £4.5m – up from the £4.3m recorded by fellow pay researcher Manifest/MM&K for 2012.
The findings come at a time of heightened political sensitivity over inequality as the economist Thomas Piketty’s Capital in the 21st Century, which claims that capitalism naturally widens the gap between rich and poor, takes the world by storm.
The Bank of England’s Governor, Mark Carney, also warned that a more unequal society was “amplifying the rewards of the superstar” as he pledged to help build a “more trustworthy” capitalism.
Although several major companies have seen significant rebellions on pay in recent months – such as Barclays, Standard Chartered and AstraZeneca – shareholders have not voted down either individual pay packages or future pay policy.
The highest-paid FTSE 100 chief executive last year was Sir Martin Sorrell, who was paid almost £30m last year.
The High Pay Centre also criticises the efforts of the UK’s biggest companies to skirt around requirements to compare pay increases for the chief executives with those given to their workforce.
Companies are allowed to choose a smaller group for comparison if they consider it appropriate, a loophole which has allowed the likes of British Airways’ owner, International Consolidated Airlines Group, to compare the pay of boss Willie Walsh with a pool of just 99 staff out of 60,000, the research says. The requirement has been “next to useless” in practice, the High Pay Centre claims.
Deborah Hargreaves, the centre’s director, said: “These figures show that the new regulations are not enough to bring top pay back to a level that is sensible, fair or proportionate. Over the past 15 years, pay for a FTSE 100 CEO has gone from being 60 times the average UK worker to 160 times, without any justification. All workers should share in a company’s success – our economy cannot succeed in the long-term if a tiny group at the top pull further and further away from everybody else.”
Outside the FTSE 100, shareholders have been more rebellious. The listed engineer Kentz had its pay policy shot down by investors at its annual meeting two weeks ago, becoming the first company to lose a binding vote on pay under the new rules.Reuse content