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Average FTSE 100 CEO pay drops

There's also been a significant drop in pay ratios between the average employee and their CEO

The average FTSE 100 CEO pay packet dropped by 17% between 2015 and 2016, according to analysis from the CIPD and the High Pay Centre.

The annual assessment found that FTSE 100 CEOs received an average annual pay package of £4.5 million during the 2016 financial year, a drop from £5.4 million in 2015.

There has also been a significant drop in pay ratios between the average employee at a FTSE 100 company and their CEO. In 2016 the pay ratio was 129:1 – so for every £1 the average employee was paid their CEO received £129. In 2015 the ratio was 148:1.

Stefan Stern, director of the High Pay Centre, was pleased with the results but thought more needed to be done. "We have finally seen a fall in executive pay this year, in the context of political pressure and in the spotlight of hostile public opinion,” he said. “This is welcome, but the response has been limited and very late. It is also so far a one-off. We need to see continued efforts to restrain and reverse excess at the top. And we should beware the ratcheting up of pay lower down the FTSE league table as CEOs and remuneration committees ‘chase the median’. This helps nobody but a few lucky top execs".

However, the report also highlights a significant gender gap when it comes to high earners. There are just six female FTSE 100 CEOs, meaning they make up 6% of the FTSE 100. Despite this they earn just 4% of the total pay. Male CEOs in the FTSE 100 earned on average £4.7 million last year, compared with £2.6 million on average for women.

Peter Cheese, chief executive of the CIPD, called for action. “Quite rightly this issue of fairness is increasingly being called out and this needs to be addressed at all levels of businesses,” he said.

“Rather than focusing predominantly on share price or short-term profit, we need a much more balanced scorecard for performance that also takes account of other indicators of success such as investment in people, social responsibility and accountability, and long-term value creation. High pay must be addressed as part of the much broader review of UK corporate governance.”

The average UK full-time worker earns a salary of £28,000, meaning it would take them 160 years to earn what an average FTSE 100 CEO is paid in just one year.