Stefan Stern: How should employers position high executive pay in the current financial climate?

Stefan Stern 430

Not everyone works for a FTSE 100 company, of course, but the biggest bosses create the most influential benchmarks. So when Tuesday 5 January came along, and High Pay Centre data showed that by the end of the day the average FTSE 100 boss would have been paid what the typical UK worker would take all year to earn, the strong public reaction was no surprise. ‚ÄėFat Cat Tuesday‚Äô made waves all week, and beyond.

This is the context for the discussion around high executive pay everywhere else. As recently as 20 years ago, few British bosses received more than 40 or 50 times what the average employee at the organisation was being paid. Today, some are getting 100, 150 times or even more. It is not obvious that leading businesses or organisations has got so much harder. Nor that the performance of these businesses, or these leaders, has merited such an explosion of pay at the top.

This is why disclosing pay ratios, if there is¬†a good story to tell, could be a useful exercise for some employers. If the¬†top people are not out of sight in terms of pay, there may be some motivational benefits in reminding the organisation that you really are ‚Äėall in this together‚Äô. Chartered Institute of Personnel and Development (CIPD) research,¬†The view from below: what employees really think about their CEO‚Äôs pay packet, published in December 2015, seems to bear this out.

But if an employee benefits professional is working for one of those firms where top pay has risen a great deal while everybody else’s pay has stagnated, then they may have more than just a PR problem. They will quite possibly be faced with a morale problem and a related productivity problem too.

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Until those at the top exercise some restraint, employee benefits professionals will have a near-impossible task of explaining why the gap between those at the top and everybody else is so large.

Stefan Stern is director at the High Pay Centre