FTSE Chief Executive pay has dropped by 13%, according to . However, the average (median) CEO salary of £3.46million a year is still more than 117 times that of the average (median) UK full-time worker, earning £29,574.
“Nobody wants to be below average”
Emeritus Professor of Corporate Financial Strategy, Professor Ruth Bender, spoke to programme about the issue of executive pay, saying:
“Executive pay has grown because everyone knows everybody else’s pay, nobody wants to be below average and there were some greedy people out there to start with. Pay has risen on that basis and now, when you join a job you are looking round and see other CEOs in this area are getting a million pounds, you think presumably that’s where I’m starting.”
“In the UK the CEOs do sometimes have their own consultants but generally it’s the remuneration committees being advised by a consultant. But it’s not just pay it’s salary, short term bonuses, long term bonuses, pensions, share options, benefits in kind. It’s not a bad deal.”
Public opinion and institutional investors are against overpaying
Professor Bender also spoke about why pay has started to reduce at the top level:
“You are starting to see it [pay being at a more reasonable level] and I always said it had to come from CEOs as regulation was not doing anything. We are starting to see it with the level of pensions coming down a notch, because public opinion is very much against it [high pay]; the institutional investors who have a voice in pay are very much against overpaying. And gradually, you’re seeing companies and directors not wanting to stick their heads that much above the parapet – there are always exceptions – and that is one of the things behind why pay is coming down.”
Concerns over CEOs leaving could be a factor in high pay
Commenting on activist shareholders influence on company structures, Professor Bender noted:
“If the CEO is paid an extra one, two or five million pounds, it makes very little difference to the overall profit of these very large companies, and so they tend not to bother about it. If you underpay your CEO and he or she then leaves, you could have a problem. Many investors and boards are worried about that, rather than giving somebody some extra money.”
