Vast difference in UK pay packages between bosses and workers

PAY PACKAGES for the bosses of Britain’s 100 biggest listed firms rose 23 percent over the past year, fuelled by payouts for the chief executives of house builder Persimmon and industrial firm Melrose Industries, a survey showed yesterday.

Excessive corporate pay has attracted public anger since the financial crisis and Prime Minister Theresa May has denounced the gap between the amounts paid to bosses and average workers as irrational and unhealthy.

The survey by the Chartered Institute of Personnel and Development (CIPD) and the High Pay Centre think tank showed the average income for chief executives of companies in the FTSE 100 share index was £5.7 million (R103.4 billion) in their financial year ending in 2017, up 23 percent from the previous year.

The increase far exceeds the 2.5 percent increase in aver- age (mean) salaries for British workers to £29 009, according to the Office for National Statistics.

A similar study a year ago showed bosses’ average pay had dropped by 17 percent over the previous year.

CIPD said the strong performance of the stock market in the years to 2017 was probably a factor in this year’s increase, but that this should prompt questions about the contribution of individual bosses to share performance as opposed to other factors, such as economic context or the wider workforce.

The CIPD report said the mean figure was skewed by very large payouts to the bosses of house builder Persimmon and Melrose Industries.

Excluding these two chief executives would bring the mean single figure down from £5.7m to £4.8m, still representing a 6 percent increase from the previous year.

The highest paid chief executive in the financial year end- ing 2017 was Persimmon’s Jeff Fairburn, who received £47.1m, more than 20 times his pay in 2016, largely due to a long-term incentive plan dating back to 2012.

That plan gave share options to managers of Britain’s second-biggest house builder, which they could sell once the company had returned a set level of cash and dividends to investors.

In February 2018 it scaled back these rewards amid criticism that a government scheme had builders.

Simon Peckham, the chief executive of Melrose Industries, an industrial turnaround specialist that had clinched an £8bn hostile takeover of British engineer GKN in March last year, was paid £42.8m in the financial year ending in 2017, mainly due to a 2012 incentive plan.

A Melrose spokesperson highlighted the impact of the long-term incentive plan. – Reuters