CEO pay 184 times average

Submitted by AWL on 18 August, 2015 - 5:51 Author: Matt Cooper

CEOs of FTSE100 companies saw their average (mean) pay increase to nearly £5 million in 2015.

Although this was only a slight increase on 2013, these executives have seen their pay go up by over 20% since 2010.

Within these figures there are even higher rates of pay. Top of the heap for the second year running is Martin Sorrell, CEO of the public relations and advertising company WPP, who saw his remuneration go up from £30 million in 2013 to £43 million in 2014 — not bad for a company that produces nothing useful at all.

In 2014 chief executives earned 184 times what the average worker in their company was paid. This is a sign of increasing inequality, the figure is up from 182 times average earnings in 2013 and 160 times average earnings in 2010. Estimates of the position in 1998 suggest chief executives earned only 47 times what their average worker did. Thus, this form of inequality has increased more than three-fold.

However, this 184:1 ratio is likely to under-estimate this inequality for two reasons. First, the figures exclude outsourced workers many of whom are amongst the lowest paid (such as cleaners and delivery workers).

Second, the ratio is calculated on the mean earnings (that is by taking the wage bill of the company and dividing it by the number of full time equivalent workers). This figure will be skewed upwards by a small number of very well paid executives. If a company has one-hundred employees, with ninety-nine earning £20,000 a year and one earning £5 million, the mean salary is £70,000. A more realistic measure of the average worker would be to take the worker in the middle of pay distribution, the 50th worker in this example, who earns £20,000.

Over the last few years in Britain median wages have been around 75 per cent of mean pay. This means that a CEO’s pay could be pushing at 200 times the pay of the median workers in their company.

It would of course be wrong to liken the chief executives to engorged pigs at a trough. However corpulent a pig is, at least it does not exploit the other animals in the farmyard.

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