CEOs at the top UK companies earned on average £4.5m last year, down from £5.4m in 2015, according to new analysis from the Chartered Institute of Personnel and Development (CIPD) and the think-tank High Pay Centre.
However, it would take the average full-time worker on a salary of £28,000 (median full-time earnings) 160 years to earn what an average FTSE 100 CEO is paid in just one year. It would take 1,718 years to earn what Sir Martin Sorrell, CEO of WPP, received last year alone (£48.1 million).
Just one quarter of the FTSE 100 companies are paying the voluntary living wage to its UK staff, according to the Living Wage Foundation.
The executive pay research also found that there were only six female FTSE 100 CEOs, earning just 4% of the total pay.
Male CEOs are likely to earn 77% more on average than their female counterparts, as they earned on average £4.7m last year, compared with £2.6m on average for women.
While Sorrell was the best paid CEO within the 100 biggest companies in the UK at £48.1m, the best-paid female was Alison Cooper, CEO of Imperial Brands, at £5.5m.
After Sorrell, the best paid CEOs were Arnold Donald, from Carnival, at £22.35m, Rakesh Kappor from Reckitt Benckiser (£14.6m), Pascal Soriot, CEO of AstraZeneca (£13.38m) and Erik Engstrom, CEO of RELX (£10.56m).
Within female CEOs, Cooper was followed by Liv Garfield from Severn Trent (£2.4m), Moya Greene, CEO of Royal Mail (£1.5m) Alison Brittain, CEO of Whitbread (£1.49m) and Carolyn McCall, CEO of easyjet at the time, before moving to ITV (£1.46m).
Peter Cheese, chief executive of the CIPD, said, “We have to hope that the reversal in rising executive pay is the beginning of a re-think on how CEOs are rewarded, rather than a short-term reaction to political pressure.
“The fall in executive pay is a step in the right direction, but it’s still happening within an overall reward system where average wages in the UK have been flat.
“Our analysis also shows a clear gender pay disparity at the top, with female CEOs receiving less than their male peers. Quite rightly this issue of fairness is increasingly being called out and this needs to be addressed at all levels of businesses.”
Stefan Stern, director of the High Pay Centre, also welcomed the decline in CEO pay but said it is a “limited and very late” response.
“It is also, so far, a one-off,” he added. “We need to see continued efforts to restrain and reverse excess at the top. And we should beware the ratcheting up of pay lower down the FTSE league table as CEOs and remuneration committees ‘chase the median’. This helps nobody but a few lucky top execs."
The CIPD and High Pay Centre recommended that all publicly listed companies should be required to publish the ratio between the pay of their CEO and median pay in their organisation; have employee representation on their remuneration committee and establish a human capital development sub-committee focusing on all aspects of people, culture and organisation.
They also urged the government to set voluntary workforce reporting standards to encourage all publicly listed organisations to provide better information on how they invest in, lead and manage their workforce for the long-term.
Margot James, business minister said, “It remains this government’s firm commitment to build an economy that works for everyone, making Britain one of the best places in the world to work, invest and do business.
“We have been very clear that to achieve this ambition businesses should be run responsibly, including ensuring executive pay is properly aligned to performance as outlined in the Corporate Governance Reform green paper.
“This report shows encouraging signs that the UK’s largest firms are already making progress in this area and our responsible business reforms, which we will publish shortly, will help to enhance the public’s trust and confidence in big business.”
Ann Francke, chief executive of the Chartered Management Institute, said, “High-profile cases of runaway executive pay and ‘rewards for failure’ have fuelled a breakdown of trust in business that needs to be rebuilt.
“As the High Pay Centre/CIPD report highlights, we need to introduce a fairer ratio between executive and average pay. We also need transparent reporting and stronger remuneration committees to make sure executive pay packages are based on long-term evaluation of performance.”
Kit Bingham, head of the board practice at global executive search firm Odgers Berndtson said, “Public concern about spiralling pay of senior executives has been rising along with their pay packets for decades and this is timely reminder that it’s not all one-way traffic.
“Managing executive pay is, however, ultimately a private matter between companies and their shareholders, who already have sufficient levers to act and curb pay when they want to.
“This government, like others before it, has proposed further reforms aimed at curbing top pay but ultimately success relies on shareholders using their voting rights to demand change.”
Meanwhile, the Pensions and Lifetime Savings Association (PLSA) said that its own research has suggested that many companies are not listening to feedback from shareholders on executive pay and the vast majority of pension fund investors think that pay gaps between executives and the wider workforce are too large.
Luke Hildyard, policy dead at PLSA’ stewardship and corporate governance, added, “Our members will be concerned by the fact that multi-million pound pay packages remain the default arrangements for CEOs, despite an absence of convincing evidence that they are necessary to incentivise or reward good leadership.”
Last month, the BBC was forced to publish the salaries of its best-paid employees. The report generated considerably criticism after it revealed that two-thirds of its stars earning more than £150,000 were male.