New research published on Monday 18 December by the High Pay Centre think tank, funded by the abrdn Financial Fairness Trust, shows that CEO to employee pay gaps at Britain’s biggest companies remained stable in 2022 after narrowing during the Covid pandemic and then widening again in 2021. However, bosses still earn 75 times more than the lowest paid workers.
High Pay Centre report reveals CEO-worker pay ratio stalled
The High Pay Centre report has found that:
- The median CEO/median employee pay ratio across the FTSE 350 was 57:1 in 2022, slightly up from 56:1 in 2021.
- 2022 saw a slight decrease in the median CEO/lower quartile (25th percentile, or lowest paid) employee pay ratio for the FTSE 350, at 75:1 compared to 78:1 in 2021.
- In the FTSE 100, the median CEO/median employee ratio was 80:1 and the median CEO/lower quartile employee ratio was 119:1 (83:1 and 111:1 in 2021).
The companies with lowest-paid UK employees (based on pay at the 25th percentile) were retailer JD Sports, where the lower quartile threshold was £11,240, pub chain Mitchells & Butlers (£15,161) and retailer WH Smiths (£18,850)
Over a fifth of FTSE 350 companies (21%) had a CEO to median employee pay ratio of over 100:1 and 3% had a ratio of over 200:1. In addition, 35% had a CEO to lower quarter employee ratio of over 100:1 and 7% over 200:1. The ratio reporting requirements exclude lowest-paid workers but the High Pay Centre estimates (based on living wage accreditation) that the median CEO to lowest paid worker (as opposed to employee) across the FTSE 350 would be around 165:1.
Previous High Pay Centre research found that 76% of people think top earners should not be paid more than 20 times their low and middle earning colleagues, while just 3% thought that it was right for CEOs to make more than low and middle earners.
Companies still not doing enough
The report argues that while the pay ratio disclosures have major limitations and imperfections that ought to be addressed, they have filled a gap in corporate reporting. Even though annual reports are typically now over 200 pages long and remuneration reports average 29 pages in length, the pay ratios are the only reporting requirements that provide investors, workers, and other stakeholders with consistent, comparable data on pay levels of workers outside the boardroom.
The High Pay Centre recommends that:
- Companies should provide more detailed information on how many jobs they provide at different pay levels
- Outsourced workers, who often carry out very low-paid work, should be included in the pay ratio calculations
- Companies should be required to communicate information on CEO to worker pay gaps directly to their workforce, as well as publishing the figures in their annual report.
High Pay Centre director Luke Hildyard said:
We need a fairer, more equal, more inclusive economy where companies create lots of well-paid jobs for all their workers, rather than a handful of obscenely paid roles for those at the top.
The pay ratio trends highlight a moment of solidarity during the pandemic when CEO to employee pay gaps narrowed, but that seems to have been lost as gaps have widened to pre-pandemic levels over the subsequent two years.
‘Failing to share pay more fairly’
Mubin Haq, CEO of abrdn Financial Fairness Trust, said:
Our biggest companies have failed to share pay more fairly during the cost of living crisis. Warm words did not translate into the narrowing of pay inequalities. Instead, pay gaps have remained stubbornly high, with a third of FTSE 350 CEOs earning more than 100 times the lowest paid quarter of their employees. With millions struggling to pay for essentials there is a need for companies to do the right thing and ensure rewards are distributed in a fairer way.
Trades Union Congress (TUC) general secretary Paul Nowak said:
Workers deserve a fairer share of the wealth they create. Too many firms are guilty of feather-bedding those at the top at the expense of the wider workforce.
At a time when food and energy bills are sky-high there is simply no justification for such huge pay inequality.
Corporate excess is bad for businesses and bad for Britain – often encouraging short-term risk-taking and greed over longer-term success.
That’s why it is vital to have workers on company boards to inject some much-needed common sense – and fairness – into boardrooms.
Featured image via Antony Robinson – Envato Elements