Executive Pay
FTSE 100 CEO pay packages 25 August 2017
A report from the CIPD and the High Pay Centre examines FTSE 100 CEO pay packages, which show that rewards at the top have dropped by almost a fifth, but still remain extraordinarily high.
The report looks at how CEO pay in the UK’s largest firms has changed between the financial year to 2015 and the financial year to 2016. It finds that over this period, FTSE 100 CEO remuneration has fallen by 17%, from £5.4 million in 2015 to £4.5 million in 2016. However, while there has been a significant drop in CEO pay, it would still take the average UK full-time worker on a salary of £28,000 (median full-time earnings) 160 years to earn what an average FTSE 100 CEO is paid in just one year. Although the average pay packages of the 25 highest paid CEOs have dropped by 24% to £9.4m in 2016, rewards for the 32 lowest paid chief executives in the FTSE 100 have increased as firms ‘chase the median’.
Access the full report - Executive pay: review of FTSE 100 executive pay packages
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Corporate Governance Reform – CEO pay ratios 25 April 2018
Government announced nine reforms to corporate governance that it wants to bring into effect by June 2018; one of which is for public companies listed on the stock exchange to report annually the ratio of CEO pay to the average pay of their UK workforce, along with a narrative explaining changes to that ratio from year to year. Pay ratios To give an example, a ratio of 50 means that the CEO is paid 50 times the average pay in the company. A Parliamentary briefing calculates pay ratios in the UK based on available data for 319 companies (most of the FTSE 350). In 2016, the average ratio between CEO pay and average employee pay was 57. The highest ratio was as high as 826 at WPP PLC (a world leader in advertising and marketing services), and as low as 2 at IP Group PLC (a group that partners with universities to build tech businesses based on intellectual property). Analysis shows that: • A company’s ratio is partly predicted by the number of employees: larger companies have higher ratios – they are less equal. • Differences in ratios between companies are also explained by the type of industry they are in – not just by company size. Some industries employ much higher proportions of highly-skilled, well-paid employees (e.g. finance), while others, like retailers, have large numbers of relatively less well paid staff. The remuneration of chief executives also varies across industries. • When looking at individual companies, ratios can fluctuate a lot from year to year. These fluctuations are due to the high volatility of top CEO pay, while pay in the wider workforce is more stable. Taken together, company size, industry and the volatility of CEO pay can largely explain a company’s ratio and changes from year to year. It is expected that these factors will feature heavily in the narrative that companies will be required to provide along with their ratios. Ratios in the briefing were calculated by taking CEO pay and dividing it by average employee pay. CEO pay is the ‘single figure’ total remuneration of CEOs, which includes salary, benefits, pension, bonus and long-term incentives, whether in cash, kind or shares. Average employee pay was calculated by taking total employee costs and dividing by total employee numbers. Total employee costs is not just wages and salaries, but also includes pensions, social security and other remuneration such as bonuses. These items (except social security) are included in CEO pay figures, so are also included in the ratio’s denominator.
The Chartered Institute of Payroll Professionals
Payroll: need to know
cipp.org.uk
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