Pay for the typical FTSE 100 CEO in 2020 has already surpassed the amount the average UK worker earns in an entire year. High Pay Centre argues that much more can be done to achieve a better balance between those at the top and everybody else, in this blog originally posted on High Pay Centre website on 5 January.

FTSE 100 CEOs only need to work until just before 17.00 on Monday 6 January 2020 in order to make the same amount of money that the typical full-time employee will in the entire year.

The calculation for ‘High Pay Day 2020’ is based on research by HPC and the CIPD, the professional body for HR and people development, showing that:

• Top bosses earn 117 times the annual pay of the average worker
• In 2018 (latest available data) the average FTSE 100 CEO earned £3.46 million, equivalent to £901.30 an hour
• In comparison, the average (as defined by the median) full-time worker took home an annual salary of £29,559 in 2018, equivalent to £14.37 an hour
• To match average worker pay in 2020, FTSE 100 CEOs starting work on Thursday 2 January 2020 only need to work until just before 17.00 on Monday 6 January – just three working days (33 hours)

High pay will be a key issue in 2020 as this is the first year that publicly listed firms with more than 250 UK employees must disclose the ratio between CEO pay and the pay of their average worker. Under changes to the Companies Act (2006), firms must now provide their CEO pay ratio figures and a supporting narrative to explain the reasons for their executive pay ratios. The first round of reporting will be seen in annual reports published in 2020.

Compared with last year, CEOs now have to work slightly longer to make the median UK salary, after their pay fell from £3.9 million. However, the fact that it now takes them until teatime, rather than lunchtime, on the third working day of the year to pocket a sum of money that half of workers did not earn for an entire year’s work in 2019 rather puts this slight fall into perspective.

How major employers distribute pay across different levels of the organisation plays an important role in determining living standards. CEOs are paid extraordinarily highly compared to the wider workforce, reflecting an approach to business that has made the UK one of the most unequal countries in the developed world.

If we want to raise incomes for low and middle earners, measures that will enable them to get a fairer, more proportionate share of the spend on pay distributed by big companies will be of critical importance.

“We should keep business out of politics” Professor John Kay from the London School of Economics told a High Pay Centre event on 19 November . “We can’t ask business leaders to determine what is good for the public.”  Professor Kay was speaking at the launch of a collection of essays the High Pay Centre has published on corporate power entitled “Whoever you vote for, big business gets in.”  Professor Kay pointed out that the opinions reflected in the corporate lobby are generally those of the business leaders, not the workforce as a whole.

In recent years, the views of big business have had huge sway at Westminster – often driving the political agenda on to territory that is at odds with the views of the voting public.  There are numerous policy issues from taxation to relations with the EU to immigration to cutting the gap between rich and poor where business has an agenda that is different from public opinion.

At the High Pay Centre, we focus on excessive executive pay and the enormous gap that has opened up with the rest of the workforce.  Our polling suggests that an overwhelming majority of people support proposals to cap bosses’ pay at a fixed multiple of their lowest-paid worker. However, whenever we press policymakers on this issue, they defer to the business lobby.

Some of our recommendations for tackling top pay came into law last year, but they were mostly watered down by corporate opposition.

Our experience with policies over top remuneration prompted us to look at corporate power in more detail and the impact this has on democracy.  In our collection of essays, Richard Murphy from Tax Research UK, presents evidence to show that tax policy is driven largely by corporate interests. For example, on the board of HM Revenue & Customs, the UK’s tax authority, there are five non-executive directors all of whom come from a corporate or financial background, with no other interest group represented.  “The result is that … a key element of democracy has been captured for the benefit of a limited but very powerful group in society.”  Mr Murphy believes democracy is threatened by financial interests driving the tax system. “This is why, for example, the UK’s budget deficit is being closed by cutting spending and not raising tax.”

Tamasin Cave from Spinwatch, highlights the investment made by businesses in lobbying parliament. “Lobbyists regularly shape public debates through the media, feeding it information they want politicians to see and keeping out inconvenient facts they would rather they didn’t.”

Trust in business and politicians among the public is at record lows. One of the reasons for this is that the public has lost faith in MPs to protect us from rapacious corporations.  In a poll conducted for the High Pay Centre in April, 74% of respondents – from all political persuasions – agreed that big business has too much power over government.

The power of big business needs to be tackled if we are to restore people’s faith in our politics and economy.

Download the essays    Watch the High Pay Centre video http://youtu.be/4ER9qYEoZDE

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