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Why CEO pay should be in proportion with the rest of the employees

CEO pay in proportion Impact Score

January 4th. The date when the average CEO of a large UK business has been paid the same amount their average employee will earn in one year. 4 days! Though if you want to look on the bright side, in the US it’s 1.5 days. Gah. And usually it’s 119 times the average employee salary.

To coin a phrase, ‘Are they worth it?’?

Back in the 60’s the ratio was around 20:1 and although the value of businesses has increased over time, not by as much as the CEO pay.  So it’s no wonder 70% people in our survey want more parity, to see the CEO being paid in-proportion to the rest of the employees. 

According to the CIPD report for 2019 here are some of the highest ratios;

  • Compass Group 283:1
  • Tesco 306:1
  • Whitbread 360:1
  • Ocado 2,024:1

Worth noting in these difficult times that two of these outliers are in the troubled hospitality sector where thousands of jobs are at risk!

Why should I care?

We believe there are two reasons to care;

  1. CEO compensation should not be related solely to financial targets, it should include elements relating to sustainability – the environment and society.  However, there is pushback from companies on this.

A report from Deloitte from 2019, shows of 10 proposals submitted by shareholders requesting pay be linked to sustainability, NONE were passed.

2. A relatively small adjustment in the pay of the highest earners, could mean a significant increase in the average pay of the lowest paid workers.

For example, research from our friends at the High Pay Centre calculated a salary cap at £250,000 per annum, would mean 48,000 people in the UK would receive a pay-cut, however 8.5m people could receive a median increase of almost £1,000 per annum.

We aren’t necessarily advocating this type of radical change, but it does go to show how relatively small change can make a very large difference.

Take Action Now!

9 in 10 of us want to live a more sustainable lifestyle, but less than 2 in 10 are actively changing our lifestyle.  We need something simple, but effective.

That’s where the free Impact Score® app. comes in.  It starts by showing you whether companies are behaving well or badly.  Who is doing the right thing across a series of measures you have told us are important to you (CEO Pay being one).

Moreover, in a couple of clicks, you can tell businesses if you are happy with their performance or not.  And if not, that the business needs to improve or risk losing your custom.

Your voice is important. Download the ‘Impact Score App’ from your mobile app store, and Make Change Happen.

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