How much is a FTSE 100 chief executive worth? Not as much as they earn, or so the High Pay Centre would have you believe. The think thank has just published its latest report on the gap between bosses’ and workers’ pay and the headline figures don’t look good.
The average pay of the FTSE 100’s chief executives was £4.96m in 2014 – a sizeable increase from 2010’s £4.12m, but a tiny step up from £4.92m in 2013 – (a slight decrease when taking inflation into account). That means a FTSE CEO is now paid 183 times the average full-time UK worker, up from 160 times in 2010.
That obviously sparked a round of criticism. ‘Pay packages of this size go far beyond what is sensible or necessary to reward and inspire top executives,’ said High Pay Centre director Deborah Hargreaves. Trade Union Congress general secretary Frances O’Grady said it was a ‘disgrace that top execs are taking an even bigger share of the rewards of growth.’
But most of them aren’t. The report is based on the mean average pay of FTSE 100 chief executives. But that is distorted substantially by the huge increase in top earner Sir Martin Sorrell’s pay package, from £29.84m to £42.97m - enough of a jump to employ around 2.5 more average-paid FTSE 100 chief execs.
The median pay package, arguably a much fairer indicator of average wages (and indeed the type of average the High Pay Centre uses to represent average workers' wages) has actually fallen from £4.1m in 2013 to £3.87m in 2014. If you adjust for inflation, bosses’ pay has dropped by 4.9% since 2010.
There are plenty of problems with Britain’s corporate governance structures and boardrooms may be ‘riddled with glaring weaknesses and conflicts of interest’, as Hargreaves suggests. But debates about how to improve that need to be based on the facts, and the fact is that pay for most of Britain’s top bosses has been in decline.