UK’s largest firms fail to cut CEO pay to navigate Covid-19 crisis


Just 36 out of the UK’s 100 biggest companies reduced their chief executive’s pay in order to help their firm navigate the coronavirus pandemic and economic crisis, according to an analysis of executive pay that found FTSE-100 CEOs are now handed, on average, the same as nearly 120 full-time workers.

Research by the Chartered Institute of Personnel and Development (CIPD) and the High Pay Centre published on Wednesday shows that the majority of FTSE 100 companies did not cut top executive pay, despite many of the firms turning to the taxpayer to pay the wages of furloughed workers.

The report found that of the 36 companies that did cut CEO pay, the measures taken were “superficial or short-term”.

It found that 14 companies cut bosses’ salaries by 20%, but pointed out that “salaries typically only make up a small part of a FTSE 100 CEO’s total pay package”. This is because most CEOs make far more money from bonuses and long-term share schemes than they receive in basic pay.

“None of the 36 companies have chosen to reduce their CEO’s long-term incentive plan (LTIP), which typically makes up half of a CEO’s total pay package,” the report said. It added that 11 FTSE 100 companies cancelled bonuses for their chief executive.”

Peter Cheese, chief executive of the CIPD, the professional body for HR and people development, said: “It doesn’t look like the pandemic has proven to be an inflection point for executive pay yet. The bulk of cuts made so far appear to be short-term and don’t signify meaningful, long-term change.”

Cheese said there was “a disconnect” between the huge pay packages awarded to CEOs “and their actual contribution to long-term company performance”.

“Too big a share of CEO payments depends on the fluctuating fortunes of the stock market and not enough on whether they are a responsible custodian of the business for all stakeholders, including, of course, the workers who drive long-term value,” he said.

The report warned that sky high CEO pay was likely to prove “particularly controversial in the case of companies that have drawn on government support”. It found that 19 FTSE 100 companies have taken advantage of the job retention scheme (JRS) or coronavirus corporate financing facility (CCFF) loan scheme.

Tim Steiner, the chief executive of supermarket delivery firm Ocado – which did not receive government support – was named as the UK’s highest paid CEO, collecting £58.7m in the year to the end of March 2019 (the latest available).

Steiner, who collected most of the money from an LTIP share deal, was paid 1,935-times that of the median salary of a full-time UK worker (£24,897). “It would take an average full-time worker approximately eight years to earn what Tim Steiner could earn in one day,” the annual high pay report noted.

An additional five companies – AstraZeneca, Diageo, Anglo American, BP and Experian – paid their CEOs more than £10m.

On average FTSE 100 CEOs took took home a pay package worth £3.61m – that is 119-times the median earnings of a UK full-time worker. The median FTSE 100 CEO pay was down slightly (0.5%) on the £3.63m collected in 2018.

Luke Hildyard, director of the High Pay Centre thinktank, said: “Very high CEO pay undermines the spirit of solidarity that many companies are trying to project as they battle against the impact of the coronavirus. More pragmatically, multimillion-pound pay awards worth over a hundred times the salary of a typical worker seems like an unnecessary extravagance during a period of such economic uncertainty.

“If we want to protect as many jobs as possible and give the lower paid workers who have got the country through this crisis the pay rise they deserve, we will need to rethink the balance of pay between those at the top and everybody else.”

The report called for pay to be set in “a more democratic fashion” with a worker representative appointed to the committees that set CEOs pay.