“Stratospheric” pay increases that have seen the salaries of top executives at a number of FTSE companies soar by more than 4,000% over the last 30 years are undermining productivity and “damaging” trust in British business.
According to a report published by the High Pay Commission following a year-long inquiry, such high growth rates compare unfavourably with those of the average UK worker. They have seen their wages grow only three-fold to a “modest” £25,900 per annum since 1980 when average salaries amounted to £6,474.
Instead, wealth has continued to flow upwards to the top 0.1% of people in the country, with the situation being nothing short of “corrosive” to the economy, “distorting markets, draining talent from key sectors and rewarding failure”.
The report entitled ‘Cheques with Balances: Why Tackling High Pay Is In The National Interest’ said: “There appears to be little truth in the myth that pay must escalate to halt a talent drain in executives. The growing pay gap between the top 0.1% and everyone else is increasing public disillusionment, damaging trust and fuelling the view that business leaders are in it for themselves.”
As a result, the Commission called for a number of reforms, which included the creation of a new national body to monitor high pay as well as the “radical simplification” of executive renumeration.
Employees should be appointed to renumeration committees and employers ought to publish the pay ratios between their highest-paid executive and the median wage, it said.
Other recommendations listed in the body’s 12-point plan to stop “high pay creating inequalities last seen in the Victorian era” included ensuring that organisations revealed the total pay figured earned by their executives and that the pay packages of the top 10 executives were published more widely than was currently the case.
HPC chairwoman Deborah Hargreaves said: “There’s a crisis at the top of British business and it is deeply corrosive to our economy. When pay for senior executives is set behind closed doors, does not reflect company success and is fuelling massive inequality, it represents a deep malaise at the very top of our society.”
