Pay for the chief executives of the UK’s biggest 100 companies has fallen by 17% over the past year, as political pressure on FTSE 100 firms to justify the salaries of their highest earners has intensified.
The average pay of FTSE 100 bosses dropped to £4.5m last year from £5.5m during the previous 12 months, according to data compiled by the High Pay Centre, a think-tank that campaigns against excessive corporate pay. The decline reverses a two-decade climb in salaries for the top-paid CEOs.
Stefan Stern, director of the High Pay Centre, said: “We have finally seen a fall in executive pay this year, in the context of political pressure and in the spotlight of hostile public opinion. This is welcome, but the response has been limited and very late. It is also, so far, a one-off. We need to see continued efforts to restrain and reverse excess at the top.”
Despite the decline, the report found FTSE 100 CEOs were paid 129 times the average wage of employees. Twenty years ago CEOs were paid 45 times more.
The High Pay Centre said: “On £28,000 per year, it would take an average UK full-time worker 160 years to earn what an average FTSE 100 CEO could earn in a year.”
Peter Cheese, chief executive of the CIPD, the professional body for HR, which co-wrote the report, said: “We have to hope that the reversal in rising executive pay is the beginning of a re-think on how CEOs are rewarded, rather than a short-term reaction to political pressure.
“The fall in executive pay is a step in the right direction, but it’s still happening within an overall reward system where average wages in the UK have been flat.”
Part of the reason for the decline this year was due to the multi-million pound drop in earnings for Sir Martin Sorrell, the founder of advertising agency WPP.
The 72-year-old’s pay dropped significantly from £70.4m to £48.1m in 2016, although Stern said that if Sorrell was excluded from the analysis, the overall fall would still amount to 15%.
The biggest climbers in terms of pay were AstraZeneca’s Pascal Soriot, whose total pay package rose by almost £5m to £13m, and British American Tobacco’s Nicandro Durante, whose total pay rose from £4.5m to £7.6m.
Stern said: “We need to see continued efforts to restrain and reverse excess at the top. And we should beware the ratcheting up of pay lower down the FTSE league table as CEOs and remuneration committees ‘chase the median’.
“This helps nobody but a few lucky top executives.”
A spokeswoman for the Investment Association, the UK’s trade body for fund managers, said the fall showed that FTSE 100 bosses were “listening to the demands of their shareholders”.
She said: “This is a welcome step in restoring public confidence in executive pay…we have seen some companies working in the right direction this AGM season, with several FTSE 100 companies taking into account pay levels when setting their new pay policies. We want to see this trend continue.”