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British CEOs will earn as much as a typical worker makes in a year by lunchtime
[LONDON] The year just began, but by Friday afternoon the CEOs of Britain's biggest companies will have already earned as much since Jan 1 as the average worker will make in all of 2019.
The FTSE 100 bosses will reach this milestone around 1pm London time, two hours earlier than last year, after an 11 per cent jump in pay, according to a report from CIPD, an association for human resource professionals, and the High Pay Centre, a research group. The CEOs will surpass female employees' full-year earnings even earlier, by around 8.30am.
Despite government efforts to make executive pay more transparent and rules giving shareholders a voice on compensation, the gap between CEOs and employees remains stubbornly high. The FTSE chiefs now earn 133 times more than workers, up from 47 times in 1998, based on their median pay.
"To raise living standards, we need growth and innovation, but also to ensure that growth is fairly distributed,'' said Luke Hilyard, director of the High Pay Centre. "CEO packages 133 times the size of the average UK worker suggest we could do a lot better in this respect.''
The disparity in Britain reflects a broader increase in income inequality across much of the developed world. When Theresa May became prime minister she made a push to clamp down on executive pay, stating that excessive compensation was "the unacceptable face of capitalism".
New rules came into force on Jan 1 that will require all publicly-listed UK companies with more than 250 employees to disclose their pay ratios starting next year and justify compensation levels for their top bosses.
Ministers "understand the frustration of workers and shareholders when executive pay is out of step with performance and their concerns are not heard", Business Secretary Greg Clark said in a statement earlier this week.
The income differential "epitomises how disgracefully skewed our corporate culture has become in some circles", said the opposition Labour Party's business spokesman, Rebecca Long-Bailey. "The Tories have done nothing to address such blatant inequality.''
Labour has pledged to raise the minimum wage and reduce pay ratios to 20:1 in state institutions if it comes to power.
There has been increasing criticism of soaring compensation. Last year, Jeff Fairburn quit as Persimmon's CEO after a year-long backlash against his £75 million (S$129.1 million) pay and bonus package.
The gulf in compensation in the US is even more glaring, with a CEO-to-worker pay ratio of 312:1 in 2017, according to an August report from the Economic Policy Institute. Average CEO compensation, based on the largest 350 companies in America, was 18 per cent higher than the previous year.
The Institute of Economic Affairs, a right-leaning think tank in London, described the UK report as a "gimmick heavily reliant on stoking public hostility" to get companies to reduce salaries at the top. It ignores the fact that CEOs' roles are becoming more important and that their decisions can "make or break" a company, the group said in a statement.