For most of us, it takes an entire year to earn enough to pay our bills, feed ourselves and keep a roof over heads– and even then, for those in insecure, minimum wage jobs, full-time work does not guarantee even the most basic standard of living.
But for top executives of the UK’s biggest companies, it’s an altogether different story. By lunchtime today (January 4) Britain’s richest bosses will have earned enough this year to match the median worker’s salary of just under £30,000.
That means they only have to clock in 31 hours in 2019 to take home what most people earn working over an entire year.
Dubbed Fat Cat Friday, January 4 is used by the High Pay Centre (HPC) each year to highlight the gaping and ever-growing disparity between the UK’s top and average earners.
‘Corporate governance failure’
This year’s HPC and CIPD analysis found that the average FTSE 100 CEO takes home a median pay packet of £3.9m annually, which equates to a rate of £1,020 an hour assuming they work 12 hours a day for 320 days each year.
Top CEOs’ median earnings are up 11 per cent from last year – now the average chief executive in the UK earns almost 150 times more than the average full-time worker, compared to only 60 times more at the turn of the millennium.
“Excessive executive pay represents a massive corporate governance failure and is a barrier to a fairer economy,” HPC director Luke Hildyard said.
“Corporate boards are too willing to spend millions on top executives without any real justification, while the wider workforce is treated as a cost to be minimised.”
The HPC and CIPD’s report recommended that companies move away from ‘long-term incentive plans’ which currently dominate executive pay models and instead opt for a much more simplified model of a basic salary with a smaller restricted share award.
They also recommended having worker representatives on remuneration committees and measuring executive pay based not only on financial success but also on other criteria such as social and environmental performance.
TUC general secretary Frances O’Grady agreed that executive pay had to be curbed.
“There are millions of hardworking people in Britain who give more than they get back, but greedy executives are taking more than they’ve earned,” she said.
“We need to redesign the economy to make it fair again and that means big reforms to bring fat cat pay back down to earth.
“Executive pay committees have to change. They should be required to include workforce representatives who can speak up for a fair balance of pay with ordinary workers.”
It’s not only workers who’ve lambasted the ever-growing gap between staff and bosses’ pay – shareholders have had enough as well. Last year saw major shareholder rebellions against executive pay awards, including at Persimmon, whose investors voted by nearly 50 per cent against a mammoth £75m award for its chief executive Jeff Fairburn.
Fairburn soon stepped down following the controversy over his pay.
Royal Mail shareholders also rejected a directors’ remuneration report by 70 per cent last year after a row over the company’s new chief executive Rico Back’s pay. Back is set to be paid £640,000 this year.
Last year, Melrose – which successfully took over engineering firm GKN in March after a hostile bid — faced a shareholder revolt over bosses’ bonus schemes, with almost a quarter of shareholders rejecting pay policies that saw four executives share £160m in 2016.
Other major companies – including outsourcing firm Serco, insurance company Direct Lane, and wealth manager Rathbones, among others – faced shareholder rebellions over executive pay, with a significant percentage of investors voting down pay reports last yaer.
Prime minister Theresa May famously said she would tackle sky-high executive pay and pledged to force workers to be on company boards –only to U-turn on this pledge less than six months later.
Labour has said it will take on excessive executive pay by introducing a ‘fat cat’ tax that will charge companies a 2.5 per cent levy on earnings above £330,000 and a 5 per cent levy on earnings above half a million.
“We’ll make sure that no public sector boss can earn more than 20 times what their lowest paid employee takes home,” shadow business secretary Rebecca Long-Bailey said today.
“And we’ll introduce a real living wage of £10 an hour. Labour will rewrite the rules of the economy so that wealth reaches out to all our communities, our public services are world class and inequality is driven from our country.”
Labour has also pledged to force companies with over 250 employees to reserve at least a third of their seats for workers on company boards.
Unite general secretary Len McCluskey hailed Labour’s plans today (January 4) on Fat Cat Friday.
“When the greedy, greedy bosses are raking in 133 times more than the average worker, many toiling to make ends meet on low pay and in insecure work, it’s time for real and radical change,” he tweeted. “Bring on @UKLabour’s pledge to tax the fat cats.”
McCluskey added that the UK’s high level of pay inequality in what is the sixth largest economy in the world was “a disgrace”.
“Only stronger unions winning better pay for all workers can reverse pay inequality,” he said.
Unite’s innovative WorkVoicePay strategy is tackling pay inequality through its new Employer Profile Generator. It arms Unite reps with information about their companies – executive pay, turnover, profits and more – to take with them into pay negotiations. Find out more here.