At an All-time CE-low: Pay drop still leaves FTSE 100 CEO’s 117 times better than UK average
September 12, 2019
2 min read
What's going on here?
Recent data shows that the average pay of a FTSE 100 CEO dropped by 13%, but at £3.4 million this is still 117 times larger than the median UK worker.
What does this mean?
Analysis at accounting firm Deloitte amongst others show that, on average, in 2017 the heads of the UK’s 100 largest companies saw their pay decrease by around £600,000. This comes despite the fact that the Chief Executives of 43 of those 100 firms saw their pay increase in the same period. To some, this is a dramatic drop, coming as a result of investors’ concerns over the size of executive compensation. These commentators point to the fact that at £3.4 million, this is the lowest CEO pay has been in five years. To others this is a small, and perhaps regressive, step to closing the income gap between those at the top and the bottom. The £600,000 cut that CEOs saw in 2017 is more than twenty times what the median UK worker earns in a whole year.
What's the big picture effect?
There are two key reasons that firms should care about this story. Firstly, consistent pay decreases for those at the top of the country’s largest listed companies could signal a wider contraction of wages for those earning in the millions, which includes several partners at big City outfits. This comes whilst the competition among City firms to recruit the best graduates has seen newly qualified (NQ) pay skyrocket. An increase which has caught the attention of clients, including those listed companies cutting their own CEO pay. It can perhaps be seen as paradoxical that CEO pay drops but NQ pay rises.
Equally, as law firms are increasingly starting to either list or prepare to list on the stock exchange, they potentially open themselves to the same forces which are causing this pay decrease, namely unhappy shareholders. This may mean that decisions on pay will be required to have stronger justifications in the future. As such, this is an issue that firms will have to keep a close eye on.
Report written by Jonny Isaacs
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