Talk about a bounce back. The UK’s biggest companies raised billions of pounds and cut billions of costs during the pandemic, producing bountiful profits last year. Shareholders and management shared in the spoils — £153bn worth of adjusted net profits for the FTSE 100 — via raised dividends, buybacks and incentive payments. Labour has not done so well.
Research from Deloitte shows FTSE 100 bosses pocketed a median £3.6mn last year, in line with the pre-Covid levels of 2018. Their pay has increased as a multiple of worker remuneration. The gap, measuring the median chief executive against their median employee, rose from 75:1 in 2019 to 81:1 last year.
Workers had previously been enjoying a brief narrowing of this differential. Based on the nearly 70 companies that reported in the first quarter of this year, the median pay gap has almost doubled to 63 times compared with unusually low levels in 2021, according to the High Pay Centre, a left-leaning think-tank.
This resumes the trend of recent years, which has seen steady rises in executive pay unaccompanied by sustained increases in performance. In a recovery year bosses were being rewarded as much for externalities as performance. This looks awkward amid an inflation-fuelled cost of living crisis. Think-tank NIESR estimates that 1.5mn households’ disposable income will not cover their food and energy bills this year.
The head of Norway’s socially conscious $1.2tn oil fund, which owns the equivalent of 1.5 per cent of every listed company in the world, has voted down pay awards at Intel and Apple. Nicolai Tangen has inveighed against corporate greed, which takes a toll on investors via dilution. The Church of England, similarly riled, says the executive remuneration system is broken.
Some bosses are more responsive than others. Chris O’Shea at energy utility Centrica waived his £1.1mn bonus. In the tone-deaf corner sit the bosses at Boohoo, who responded to a dud incentive scheme — in the sense targets were missed and it thus failed to pay out — by drawing up a new one.
Big pay awards look set to gather more opprobrium during this annual meeting season. Shareholders should show their teeth. If they cannot get companies to follow their views on pay, they should expect to be ignored on everything else.
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