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FTSE 100 CEO pay rises by 11% in a year

CEO reward increases outstrip pay rises for the wider workforce, fuelling questions over fairness and governance in Britain’s businesses

FTSE 100 CEO median pay rose by 11% between 2016 and 2017, despite recent criticism from the investor community and the government over excessive pay awards, finds new research released today from the CIPD and the High Pay Centre.

The annual assessment of FTSE 100 CEO pay packages shows that FTSE 100 CEO median pay now stands at £3.93 million per year, up from £3.53 million in 2016. This compares to a 2% rise in median pay for full-time workers over the same period.

The highest-paid CEO in the financial year ending 2017 was Jeff Fairburn of Persimmon who received £47.1 million, 22 times that of his 2016 pay. Close behind was Simon Peckham of Melrose Industries who received £42.8 million, 43 times his 2016 pay.

The research highlighted that progression for women is still an issue. It showed that a FTSE 100 CEO is as likely to be named David/Dave or Stephen/Steve as they are to be female. There were just seven female FTSE 100 CEOs in 2017, an increase from six in 2016 and five in 2015. At the current rate of one new female CEO each year it will take 43 years for women to make up 50% of the FTSE 100 CEOs. The seven female CEOs also earn on average less than their male counterparts; just 3.5% of total pay while making up 7% of CEOs.

The report notes that this year’s analysis is affected by two large payouts for the CEOs at Persimmon and Melrose Industries (£47.1 million and £42.8 million respectively), and as a result the report leads with the median, rather than the mean, figure. While using the median measure of CEO remuneration reduces the impact of these two outliers, it still shows an increase in earnings of 11%. However, when the mean measure is used an increase of 23% is revealed from £4.58 million in 2016 to £5.66 million in 2017.

Despite paying higher CEO salaries, just 34 companies in the FTSE 100 are accredited by the Living Wage Foundation for paying the living wage to all their UK-based staff.

Peter Cheese, chief executive of the CIPD, said these latest figures show that efforts to curb executive pay have had little effect.

“Despite increased investor activism and the planned introduction of pay ratio reporting, the evidence suggests that very little is changing when it comes to top pay in the UK. It’s disappointing to see that CEO pay has held up in the face of increasing pressure when average pay across the workforce has barely shifted in recent years. However, pressure is building in the system,” he said.

He added that it is time for businesses to examine high pay and push for long-term organisational sustainability.

“Given the ongoing issues of trust in big businesses and a push for greater transparency, it really is time businesses and boards put greater scrutiny on high pay, and that they think much more objectively about what they are rewarding CEOs and how.

"Financial performance alone does not signify CEO success and must be balanced with development of the organisation’s long-term sustainability and value. Investors and boards need to look beyond share price and consider a much broader range of indicators that show how that individual is performing for the long-term good of the business, its workforce and other stakeholders.”