IEA responds to High Pay Centre’s analysis of FTSE 100 CEO salaries


Energy and Environment

Christopher Snowdon writes for The Critic

In the Media

Christopher Snowdon writes for City AM

Commenting on the High Pay Centre’s analysis of FTSE 100 CEO salaries, Professor Len Shackleton, Editorial and Research Fellow at the Institute of Economic Affairs, said:

“The High Pay Centre’s report suggests that CEO pay responds both to market forces and investor pressure, with a significant fall of 17 per cent between 2019 and 2020. This tends to dispel wilder assertions about executive pay being rigged in some way to produce ever-increasing levels of pay for bosses, although it has not placated the HPC’s desire for massive redistribution within businesses. 

“The most-quoted figure FTSE companies are obliged to report is the ratio between CEO pay and median employee earnings. The data show a predictable pattern: the ratio is highest in areas such as retail, where the typical employee is a part-time supermarket worker, and lowest in areas such as financial services where median earnings are high. Yet in many cases the CEOs in finance earn more than those at Tesco or Morrisons. 

“There is an attempt to show, by carefully selected examples, that cutting CEO pay to a maximum of £1 million per year would allow substantial increases in earnings to the lower paid. But this misleads. Cutting the pay of the Tesco chief executive to this level would appear to allow an increase of around £15 a year to the company’s typical employee.  

“The report makes no attempt to analyse the knock-on effects of such redistribution in terms of companies’ entire pay structure, nor of the implication for jobs were unskilled workers to be paid considerably in excess of their productivity. It is a thought experiment of little relevance to the real world. 

“As available information is never enough, the report calls for further ‘granular’ detail on pay, plus a requirement for non-UK listed companies, and indeed all major employers, to provide pay data. There is also an ill-thought-out demand for information on the pay of those ‘indirectly’ employed by a company – separate entities providing cleaning, catering and transport.  

“The HPC’s familiar wishlist is again trotted out. This includes worker representation on boards, a return to widespread collective bargaining, sectoral ‘governance bodies’ to monitor ‘fair pay’, compulsory profit-sharing schemes – a full socialist package. 

“Monitoring of executive pay can provide a useful service for investors. However the HPC’s analysis should not be taken as an endorsement of a package of radical policies which would have unforeseeable but almost certainly damaging consequences for the economy.” 


Notes to editors 

Contact: Emily Carver, Head of Media, 07715 942 731

IEA spokespeople are avaialable for interview and further comment.

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