In the first three days of 2019 top bosses will have earned more than the typical worker will earn all year, according to a report. The average pay of a FTSE 100 chief executive is £1,020 an hour, research from the High Pay Centre and HR industry body the CIPD has found.
By “Fat Cat Friday” bosses will have earned more than the typical annual UK salary of £29,574, the report said. However critics have questioned their calculations.
According to the report, the median pay including bonuses for a FTSE 100 chief executive was £3.926m in 2017, the most recent year for which data is available.
It assumed that bosses work 12 hours a day for 320 days a year, making their hourly pay rate £1,020.
“Excessive executive pay represents a massive corporate governance failure and is a barrier to a fairer economy,” said Luke Hildyard, Director of the High Pay Centre.
“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,” he said. The £29,574 figure for median pay of full-time UK workers was taken from Office for National Statistics data.
To match that salary, FTSE 100 bosses would have to work for 31 hours, or until 13:00 on Friday 4 January.
However, free-market think tank the Adam Smith Institute described the research as “cod statistics”.
“If these activist organisations actually cared about workers, and not just the politics of envy against our best and brightest, they would talk about ways to actually increase worker pay,” said Matthew Lesh, head of research at the Institute.
“Limits on executive pay would drive top British talent and companies offshore, ultimately leading to fewer jobs and lower pay for workers,” he said.
The CIPD report said typical pay for a FTSE 100 chief executive had risen 11% from last year. That means bosses had to work two hours less this year to match the average worker’s annual salary, compared with 2018.
“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. Too much wealth is being hoarded at the top,” said TUC General Secretary Frances O’Grady.
Last year, the chief executive of Persimmon, Jeff Fairburn, was forced out after a row over his £75m pay award.
The bonus was based on awards of shares, the value of which rose sharply when low interest rates and a government house-buying scheme helped raise Persimmon’s performance.
In October he walked away from a BBC interview when asked about his pay. In July, Royal Mail shareholders rebelled against the company’s pay plans for top executives following a row over a salary rise for its new boss.
The directors’ remuneration report was rejected by about 70% of shareholders in a vote, which is non-binding. New chief executive Rico Back is set to be paid £640,000 – £100,000 more than his predecessor Moya Greene.
The CIPD and High Pay Centre want long-term incentive plans, which reward top executives with shares, replaced with a less complicated system based on their basic salary.
They also want executives to be given incentives to improve the training and well-being of their workforce.