'Shocking disconnect' at FTSE 100 firms as bosses get 10% pay rises

‘There is apparently no end yet in sight to the rise and rise of FTSE 100 chief executive pay packages,’ says think-tank

A study of annual reports of FTSE 100 companies showed the average pay package for a chief executive was £5.48m in 2015 (Getty)

Company bosses have received 10 per cent pay rises, while only a quarter of FTSE 100 firms pay the living wage, leading to an “unhealthy and growing” gap in wages, a new report said.

A study of annual reports of FTSE 100 companies showed the average pay package for a chief executive was £5.48m in 2015, up from £4.96m in 2014. Think-tank High Pay Centre said its research also found that chief executives were paid 140 times more than their employees on average.

In contrast to the “generous” pay packages awarded to executives, only a quarter of FTSE 100 firms are accredited by the Living Wage Foundation for paying the voluntary living wage to their employees. Big pay remains a “boys club”, with no women in the top 10 highest paid chief executives, said the report. Only one company has an employee representative on the board, while none publishes details of the pay ratio between chief executives and other employees.

Stefan Stern, director of the High Pay Centre, said: “There is apparently no end yet in sight to the rise and rise of FTSE 100 chief executive 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 said: “The High Pay Centre was delighted by Theresa May's recent intervention on this issue. There now seems to be political will and momentum behind attempts to reform top pay.”

Chart: Statista

Mr Stern said the think-tank supports two of the Prime Minister’s proposals – that companies should be obliged to publish the ratio between the pay of the chief executive and the average worker in the business, and that “the voice of the ordinary employee must be heard in discussions over executive pay”. “Businesses could save themselves a lot of grief, and do something to restore their reputations, if they listened to workers first before awarding these bumper pay packages,” said the High Pay Centre director.

Peter Cheese, chief executive of the Chartered Institute of Personnel and Development (CIPD), said there is still “a shocking disconnect” between pay for those at the top and the rest of the workforce in large companies. “Worse still, this gap is continuing to grow despite our latest data showing that it leads to a real sense of unfairness that has a clear impact on employee motivation,” he said.

Mr Cheese pointed to a recent study by the CIPD, which showed that six in 10 employees say that high levels of chief executive pay in the UK demotivates them at work. He said: “The message from employees is clear: ‘The more you take, the less we'll give.’ This kind of culture in the workplace is bad for both employers and employees.”

Press Association