Happy ‘Fat Cat’ Thursday

Thursday 4 January 2018 is dubbed as ‘Fat Cat Thursday’ – the day by which a FTSE-100 CEO earns the median annual salary of a UK full-time worker

Calculations by the CIPD and High Pay Centre have found that after just three working days, the UK’s top bosses will have made more money than the typical UK full-time employee will earn in an entire year. 

This calculation is not designed to make that return to work even harder than is it after the festive season, but an important reminder of the continuing challenge of unfair pay. Despite, a 17% drop in FTSE 100 average pay packets this year from £5.4 million to £4.5 million, more needs to be done to ensure remuneration across the whole organisation better reflects company performance and purpose. 

2017 has seen some important headway in this space with government taking action on curbing boardroom excess and increasing transparency.  This saw the first public register published by the Investment Association in December 2017, naming and shaming FTSE companies that have had significant shareholder rebellions over executive pay. 

The current review of the Corporate Governance Code by the Financial Reporting Council, announced as part of efforts to enhance trust in business and improve corporate governance will also go some way towards ensuring executive pay reflects a balance between monetary and non-monetary success measures. And as part of the Government’s reforms, we will see 900 listed companies publishing and justifying the pay ratio between chief executives and their average worker. 

The CIPD and High Pay Centre will be working closely together to ensure this extremely important issue remains top of the agenda for both government and investors. We need a radical re-think on how and why we reward CEO’s, and the opportunity to broaden the remit of the remuneration committee to ensure a wider focus on the workforce in general could be a real catalyst for change. 

In addition to government action, we need organisations to assess their levels of executive pay, and ensure that it reflects achievement. CIPD research has found that excessive CEO pay has a significant impact on the motivation and engagement levels of the wider UK workforce. In order to ensure that productivity doesn’t suffer as a result, CEO reward packages need to be simpler and more clearly aligned to performance and business outcomes, both financial and non-financial.

Read the CIPD’s framework for executive remuneration.

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