Executive pay is under scrutiny

Over the last decade the earnings of top company ‘fat cats’ have shot up four times that of the national average.

Thursday, 25th April 2019, 4:19 pm
Ronnie Campbell MP Picture by Jane Coltman

FTSE 100 chief executives earn around £4m a year compared to the average of under £30,000, while most of my constituents earn much less than that.

Clearly, a decade of austerity and belt-tightening has not applied to all.

Real term average earning is rising by just 0.7 per cent annually when inflation is considered. That is doing little for workers feeling the effects of the longest pay squeeze for 200 years.

How can it to right, during a time of food banks and zero hour contracts, that house builder Persimmon chief executive’s annual package came to £38.97m before stepping down at the end of last year? That’s £749,370 a week. The company’s finance director had a 2018 package worth £25.96m.

This company is just one of many whose executive pay is under scrutiny and there are many more examples.

The cross-party business, energy and industrial strategy (BEIS) committee, which produced the figures above, has called for businesses to move executive pay from excessive bonuses.

And it wants workers to have a greater say on pay and conditions. That would mean getting workers on remuneration committees, including staff in profit-sharing schemes and creating a stronger link between executive and employee pay.

And if that fails, watchdogs should get tough on businesses that pay exorbitant sums to their chiefs.

So far, the Financial Reporting Council, meant to regulate top pay, has not made much more than a dent in fat cat bonuses. That must change.

Committee chairman Rachel Reeves said: “Public scrutiny has often had more influence than investors or remuneration committees in getting companies to reverse outrageous executive pay decisions.”

She is dead right on that, and it is a disgrace.