Fat Cat Friday: FTSE 100 executives earn 133 times more than average UK worker

The median compensation for a FTSE 100 boss was up 11 per cent on a year earlier, meaning that the theoretical time taken to earn more than an ordinary worker fell by two hours

Ben Chu
Economics Editor
Friday 04 January 2019 01:11 GMT
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What is Fat Cat Friday?

The average earnings of FTSE 100 bosses will, as of today, surpass the annual remuneration of the average UK worker, emphasising extreme pay inequality in modern Britain and throwing a spotlight on how rewards for UK executives are determined.

The calculation that today marks “Fat Cat Friday” comes from the High Pay Centre think tank and the Chartered Institute of Personnel and Development (CIPD).

Their calculation is based on an analysis of FTSE 100 public reports, which show the median remuneration for bosses in 2017 was £3.926m, while median earnings for full-time workers was £29,574 last year.

This implies that these chief executives take just 29 hours – or three working days – to earn as much as an average worker receives in a whole year and that they will overtake them by 1pm today (Friday 4 January).

The groups calculate that the median compensation for a FTSE 100 boss was up 11 per cent on a year earlier, meaning the time taken to earn more than an ordinary worker falls by two hours.

Peter Cheese, the chief executive of the CIPD, suggested that soaring corporate pay was a factor in the current turmoil in our politics.

“Excessive pay packages awarded by remuneration committees represent a significant failure in corporate governance and perpetuate the idea of a ‘superstar’ business leader when business is a collective endeavour and reward should be shared more fairly. This imbalance does nothing to help heal the many social and economic divides facing the country,” he said.

The groups also estimate that the ratio of CEO to worker pays now stands at 133 times.

Theresa May’s requirement for companies to publish the intra-firm pay ratio enters into force this year, but her initial promise in 2016 when she became prime minister to put workers on company boards, in order to help rein in pay at the top, has been severely watered down.

The CIPD and the High Pay Centre argue that the manner in which company remuneration committees determine compensation levels for bosses needs to be reformed so pay at the top is aligned with rewards across the company’s wider workforce.

To this end it recommends that measures such as employee well-being and investment in workforce training are also taken into consideration.

Andrew Ninian, director of stewardship and corporate governance at the Investment Association, which represents investment managers, said that despite the public anger of excessive pay – which helped to force the departure of the Persimmon boss Jeff Fairburn last year – companies were too often ignoring shareholder concern over pay.

“The last year has seen continued shareholder discontent on executive pay, with 63 companies appearing on the Public Register of shareholder votes for pay-related issues in 2018. This is a result of shareholders feeling they are not being listened to,” he said.

“Companies need to do more to respond to shareholder concerns and ensure pay rewards align with company performance and remain at levels that are justifiable to shareholders.”

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Mark Littlewood of the Institute of Economic Affairs group sought to defend chief executives against the argument that they are overpaid.

“The concept of ‘super talent’ is no myth. In our globalised economy, CEOs’ roles are indeed becoming more important as their decisions can make or break a company – and determine the fate of thousands of people’s jobs,” he said.

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