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CIPD: CEO pay ratio reporting shouldn’t be treated as a tick-box

Top bosses’ pay overtakes the average worker’s entire 2020 pay in three days, according to research from the CIPD and think tank High Pay Centre.

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FTSE 100 CEOs earn 117 times the annual pay of the average worker
FTSE 100 CEOs earn 117 times the annual pay of the average worker

The organisations found that FTSE 100 chief executives (CEOs) only need to work until just before 5pm on January 6th 2020 in order to make the same amount of money that the typical full-time employee does in the entire year.

 

The CIPD and High Pay Centre found that these top bosses earn 117 times the annual pay of the average worker.

 

It also found that in 2018 the average FTSE 100 CEO earned £3.46m - equivalent to £901.30 an hour. In comparison, the average (as defined by the median) full-time worker took home an annual salary of £29,559 in 2018 - equivalent to £14.37 an hour.

 

The CIPD said high pay will be a key issue in 2020, as this is the first year that publicly listed firms with more than 250 UK employees must disclose the ratio between CEO pay and the pay of their average worker.

 

Under changes to the Companies Act (2006), firms must now provide their CEO pay ratio figures and a supporting narrative to explain the reasons for their executive pay ratios. The first round of reporting will be seen in annual reports published in 2020.

 

However, the CIPD and High Pay Centre are calling on businesses not to treat the new reporting requirements on executive pay as a ‘tick-box’ exercise and to use it as an opportunity to fully explain CEO pay levels.

 

They also highlight the need for firms to provide a clear rationale for why CEOs are paid what they are and what is being done to address the issue of fair pay in their organisation more broadly. The CIPD and High Pay Centre consider this an important step to help build trust in business amongst employees, wider stakeholders and society.

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