UK bosses' pay 'absurdly high' and slashing salaries would 'not hurt economy', warn top head-hunters

Top 10 recruitment firms admit some chief executives are 'mediocre' and could be replaced by 100 others

(GETTY IMAGES)

Salaries for Britain's top business leaders are "absurdly high" and there would be no negative impact on the economy if their pay was slashed, a study has found

Head-hunters from the top 10 international recruitment firms claimed many people chosen for top jobs in recent years were "mediocre" and that each of them could be replaced by another 100 candidates - just as capable of doing the job.

A London School of Economics report analysing the FTSE 100 companies accounts found chief executives earned an average of £4.6m a year.

On average FTSE 100 CEO pay in 2014 was 183 times the full-time UK worker, up from 182 times in 2013 and 160 times in 2010.

The report featured interviews with the top 10 international recruitment firms involved in up to 90 per cent of chief executive appointments over recent years.

It said the market rules for executive jobs had set the salary bar so high that head-hunters agreed it would be "a poor strategy" to ask for less money to do the same job.

On the contrary, it said asking for a bigger pay seems to have "a positive effect in securing the appointment".

Max Steuer, reader emeritus at the LSE and author of the new research paper, Headhunter Methods for CEO Selection, wrote: “There was almost universal agreement among the search firms that levels of remuneration for CEOs in large UK non-financial firms was absurdly high,"

"All the interviews supported the notion of an arbitrary norm for pay, which almost all firms felt was grossly and inappropriately high … The general view of search firms is that a lower norm would not materially affect what happens.

One head-hunter told him: “I think that the wage drift over the past 10 years, or the salary drift, has been inexcusable, incomprehensible, and it is very serious for the social fabric of the country.”

Mr Steuer said it was unlikely British executives would leave the UK if they were paid less. He cited examples like in Denmark and other European countries, where chief executives are paid less than in the UK but appear to have no intention to leave.

"Contrary to people saying these chief executives are ‘unusually able’, we don’t find any evidence of that," he added.