Corporate Governance and the pay gap

Executive pay fell last year but top bosses will still have made more money in three days than the typical worker earns in a year, new figures reveal.

UK top companies, Corporate Governance, pay gap
UK top executives pay gap

The mean pay of chief executives in FTSE 100 companies fell by a fifth from £5.4 million to £4.5 million – 120 times more than an average full-time worker, a slight drop on the ratio of 122-1 in the previous year.

The High Pay Centre think tank and the Chartered Institute of Personnel and Development (CIPD) said there had been “modest” restraint by company boards but the pay gap between the top and average workers remained wide.

All listed companies will have to publish the pay ratio between bosses and workers under new corporate governance reforms this year.

While it was encouraging to see a tiny amount of restraint on pay at the top of some FTSE 100 companies last year, there are still grossly excessive and unjustifiable gaps between the top and the rest of the workforce. Publishing pay ratios will force boards to acknowledge these gaps.

The drop in pay in the last year is welcomed but will have largely been driven by the Prime Minister’s proposed crackdown on boardroom excess.

It is crucial that the Government keeps high pay and corporate governance reform high on its agenda, but we also need business, shareholders and remuneration committees to do their part and challenge excessive pay. We need a radical rethink on how and why we reward chief executives, taking into account a much more balanced scorecard of success beyond financial outcomes and looking more broadly at areas like people management.

The current review of the UK Corporate Governance Code provides a great opportunity to broaden the remit of remuneration committees to ensure that there is much more focus on the wider workforce and employee voice when decisions on chief executive pay are being made, to improve fairness and transparency.

We are experienced on corporate governance and if you have any queries send us an email  info@stanleycarter.co.uk or check our website for further details www.stanleycarter.co.uk

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