Research from a think-tank reveals that, on average, it takes less than three days for the CEO of a FTSE 100 company to earn more than an employee’s annual wage. 

The High Pay Centre, a think-tank that analyses data concerning top incomes, has found that the 6th January 2021 marks the day that a FTSE 100 CEO surpasses the average wage of a full-time worker in the UK.

This essentially means that the salary of an average FTSE 100 CEO is 120 times more than the typical worker in the UK. As such, it takes only 34 hours for top figures – or three working days when assuming an average CEO’s working hours are 12 hours- to reach the same salary as an average worker makes in a year.

However, the study states that these figures may not be reflecting the most updated data as it does not reflect the full impact that COVID-19 has had on salaries and pay gaps between employees and CEOs.

CIPD previously analysed** the response from FTSE 100 executives during the pandemic and how the global pandemic affected their pay. According to a report published in August 2020, 36 companies within the group announced executive pay cuts.  In addition, 11 firms cancelled bonuses for executives although one firm only scrapped cash bonuses. Across the board, the most common move was to cut executive directors’ salaries by a fifth (20 per cent).

The findings of the CIPD’s 2020 report, created in collaboration with the High Pay Centre, recommended that remuneration committees should be reformed in order to contain a broader range of expertise. In addition, it suggests this reformation should also mean a wider remit to consider CEO pay in the context of the pay and performance of the
workforce as a whole and the company’s culture and diversity.

The ‘High Pay Day’ – the day when CEOs wage surpasses that of the average UK worker – will raise concern about whether major employers are distributing pay in a way that rewards the contribution of different workers fairly, says the High Pay Centre.

Peter Cheese, chief executive of the CIPD, the professional body for HR and people development, reflected on FTSE 100 CEOs high pay in 2019, stating:

Fairness is one of the biggest challenges facing society today. The gulf between the pay at the top and the bottom ends of companies is slightly smaller this year but it’s still unacceptably wide and undermines public trust in business.

We must question if CEOs are overly focused on financial measures and are being incentivised to keep share prices high rather than focusing on the long-term health of their business. Being a custodian for the business and its people over the longer term must surely be a chief executive’s ultimate duty, rather than simply focusing on short-term gain.

We need to challenge excessive pay, especially when too often it doesn’t match up to company performance. Boards, and remuneration committees in particular need to review how they reward their top executives. They need to ask if it is fair when set against the overall reward strategy and practices of the organisation and if it is warranted in terms of performance.

After all, success is the collective endeavour of the many, not just the few at the top. And that point has never been more important in these times of significant uncertainty.

*This research was obtained from High Pay Centre, published in 2021. The calculations were based on previous analysis of CEO pay disclosures in companies’ annual reports, combined with government statistics.

**This report was published by the CIPD, in association with the High Pay Centre, in August 2020. It is entitled ‘FTSE 100 CEO pay in 2019 and during the pandemic’.