Daily Management Review

British Corporate Honchos Get Paid 183 Times Compared to the Average Worker


British Corporate Honchos Get Paid 183 Times Compared to the Average Worker
The wage gap between the highest paid and the average worker is widening in the UK, according to a recent survey.

The survey conducted among CEOs from the UK's top 100 listed firms showed that the top executives earned 183 times more than their companies' average worker in 2014.

A year ago this gap was 182 times, the survey said, and 160 times in 2010.

The survey was conducted by the pressure group High Pay Centre pressure.

"Pay packages of this size go far beyond what is sensible or necessary to reward and inspire top executives," High Pay Centre Director Deborah Hargreaves said in a press statement.

The survey report was conducted from the company reports of the UK’s largest firms. The report found that the average total pay for a chief executive of the top companies in Britain touched £4.964 million.

The same figure a year ago was £4.923 million and £4.129 million in 2010.

On the other hand, data from the Office for National Statistics shows that the average worker earned £27,200 in 2014 which means that the FTSE honchos were paid 183 times more than the average employee in Britain.

It has been long criticized that the FTSE 100 average concealed considerable disparities in the remuneration of top executives as compared to the average worker in the UK. The study found that Sir Martin Sorrell of WPP was by far the highest paid CEO with a remuneration package of £43 million in 2014.

The other top earning CEOs of 2014 among the top 100 companies in Britain include Ben van Beurden of Royal Dutch Shell who earned £19.5 million, Erik Engstrom of Reed Elsevier who got £16.2 million and Peter Long of Tui Travel received a package of £13.3 million.

There were disparities among the CEO pays even in the top 100 companies as was evident from the annual pay package of £150,000 in 2014 of Dave Forsey, the chief executive of Sports Direct, said the

High Pay Centre study. Reports however said that Forsey is slated to get a bumper remuneration package worth £6.7 million in 2015 due to the vesting of a share scheme.

The study however noted that while the pay packages for the top executives of the top 100 companies increased, the companies themselves contracted by 3 per cent per cent in 2014.

“Pay packages of this size go far beyond what is sensible or necessary to reward and inspire top executives. It’s more likely that corporate governance structures in the UK are riddled with glaring weaknesses and conflicts of interest,” said Deborah Hargreaves. She added that this was a indication of the failure of corporate governance as the companies continued to increase the remuneration for top bosses while the performance of the companies faltered.

Britain has a rule that compels companies to hold a binding vote on future pay policy every three years at least. This year a large percentage of shareholders, often in double digits, voted against remuneration packages. The companies whose shareholders voted against exemplary pay packages included WPP, HSBC and Morrisons.

However according to the High Pay Centre, the average vote against pay awards across the FTSE 100 were just 6.4 per cent.

There have also been demands of British companies to follow the American norm of publishing the pay ratio between their chief executive and their median employee.

(Sources: www.theindependent.co.uk & www.cnbc.co) 

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