Although we are only a few days into 2018 and most of us have just about got used to setting the alarm again, the average FTSE CEO has already earned the average UK wage.
So by the end of this first week in January, in theory, they could pack up and go home. Which is all very well when you are earning over £1,000 an hour.
Now many will say, so what? Who cares about pay at the top? Surely we ought to be concerned only with pay at the bottom, especially as we know that nurses, policemen and teachers have visited food banks over the past year?
It matters because, as the International Monetary Fund (IMF), World Bank and CBI have all recognised – inequality is bad for the economy. It’s also bad for staff motivation, as a survey for the Charted Institute of Personnel and Development revealed.
The CIPD found that 71% of staff thought that CEO pay was too high and 59% felt demotivated by such high pay. And the simple truth is that excessive high pay is not a global necessity. The UK has some of the highest CEO pay, whereas in Japan, for example, CEO pay is five times lower.
The UK situation is not surprising when you think of the role that remuneration committees and headhunters play in escalating top pay. In addition, research from Lancaster University Management School has found a ‘neglible’ relationship between pay and performance, which means that whether they perform well or not, FTSE CEOs can still expect a nice fat pay packet.
So let’s put fat cat pay in context. Yes it has come down slightly, as Sir Martin Sorrell has seen his pay cut from £70 million to a mere £40 million and organisations such as The Equality Trust have campaigned for pay transparency. But excessive CEO pay is also a hygiene issue for business and has been highly criticised throughout 2017. However, as we have calculated, the average CEO earned 242 times the wage of a minimum wage worker, 197 times the wage of a care worker, 108 times the salary of a nurse and 91 times the salary of a teacher. An indictment of the huge gap between those choosing Ferraris and those visiting foodbanks.
Furthermore, as an insurmountable bank of evidence shows, in countries with high levels of inequality (the UK is one of the most unequal countries in the developed world), there are also higher levels of physical and mental ill health, obesity, incarceration and crime and lower levels of social mobility, educational attainment and trust. So there’s a wider story than just fat cat pay.
Income inequality is a component of and result of a range of other inequalities, such as pay gaps experienced because of barriers such as race, gender and disability. The Equality Trust welcomes the Government’s commitment to legislation forcing companies to disclose their pay ratios and we shall be campaigning on this issue at our Pay Compare campaign. By highlighting the difference in pay between a footballer and the groundsmen, a CEO and the cleaners and the Vice Chancellor and university staff, we hope to demonstrate how unequal our pay systems are, how differently society values individuals, and how we can change this.
Inequality is not inevitable and we can reduce it.
Wanda Wyporska is director of The Equality Trust. Visit their website here to find out more about them.