Too cushy for the money

Being a CEO is low risk compared to most 'ordinary' jobs; the old argument of risk and reward traditionally used to justify fat-cat salaries cannot therefore be sustained.

by The Work Foundation
Last Updated: 23 Jul 2013

This is what new research from the Work Foundation concluded in a study of FTSE 100 CEOs and UK labour market data. Nick Isles, who carried the research, says that not only do CEOs stand less chance of being fired, they are also protected from any fall from grace with handsome pay packages and benefits.

For the year ending July 31 2006, CEO packages increased 28% against an average wage increase of 4%. FTSE 100 CEO turnover stood at 14% compared with a national average in the UK of 18.3% generally, and 22.9% in the private sector.

Of the 14 CEOs who left their positions in that year, only one was made redundant. He left with a £5 million pay off. In contrast, a man earning the UK average salary of £25,800 with an average tenure of seven years would receive around £3,700.

"Reward should go to the talented, the able, the entrepreneurial and the wise," says Isles. "But let's not base arguments about rewards on myths about risks that are not actually present. It's a perversion of the market principles."

The report concludes with recommendations of progressive taxation to put a brake on excessive pay. It also calls for a High Pay Commission to be established to set reliable benchmarks and make public recommendations to company boards.

Source: The Risk Myth: CEOs' and labour market risks
Nick Isles, The Work Foundation
Dec 2006

Review by Emilie Filou

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