Today (04/01/2018), also known as Fat Cat Thursday, FTSE-100 chief executives will have earned more money than the average worker will do in an entire year, according to calculations by the High Pay Centre and the CIPD.
Last August, an annual assessment of FTSE 100 chief executive pay packages from the CIPD and the High Pay Centre showed that the average FTSE 100 chief executive receives an annual pay package of £4.5 million compared with £5.4 million in 2015. It is estimated that it would take an average UK full-time worker 160 years to earn what an average FTSE 100 chief executive could earn in a year and that 60 of the FTSE 100 chief executives earn more than 100 times the UK average salary.
Pension funds are long-term investors in the economy, representing more than 60 percent of all institutional investment in the UK (£2.2 trillion) according to data from The Investment Association. As such, they are affected by the governance and pay culture of the companies they invest in.
Luke Hildyard, stewardship and corporate governance policy lead at the Pensions and Lifetime Savings Association (PLSA), said the “huge" pay differences between executives and the wider workforce symbolises how too many companies fail to understand or appreciate the value of their workers.
“Pension scheme investors use information about the employment models and working practices of the companies they invest in, including the pay gap between the top executives and the rest of the workforce, as indicators of the corporate culture," he said.
"While companies spend a lot of time devising complicated and very generous pay awards, our Hidden Talent research found that only seven percent of FTSE 100 annual reports detail the ratio between the chief executive’s pay and the wider workforce; only 21 percent provide evidence of how much they are investing in training and staff development; and just seven percent show how much they rely on agency workers or other types of insecure employment.
“As long-term investors, pension funds think that boards should be more sceptical about the need for vast executive pay awards and focus on explaining how they are fostering innovation, improving productivity and developing a positive employment culture throughout their organisations,” he added.
The Pensions and Lifetime Savings Association has members including over 1,300 pension schemes with 20 million members and £1 trillion in assets, and over 400 businesses.
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