Amidst a backdrop of soaring prices impacting most workers' earnings, top executives of major British companies witnessed an average pay increase of nearly 16% last year.
The High Pay Centre revealed that the median compensation for a chief executive officer (CEO) within the FTSE 100 rose to £3.91 million in 2022, up from £3.38 million in 2021.
The report highlighted that the average earnings of an FTSE 100 CEO were 118 times higher than those of an average UK worker, earning £33,000 annually.
Critics denounced the substantial executive earnings, though some firms contended that their pay structures were aligned with industry norms.
According to the High Pay Centre, a think tank monitoring executive pay, the highest-paid CEO in 2022 was Sir Pascal Soriot, leading the pharmaceutical behemoth AstraZeneca, with earnings of £15.3 million. AstraZeneca gained global recognition for its partnership with Oxford University in developing a Covid-19 vaccine.
Charles Woodburn from the aerospace and security firm BAE Systems secured the second-highest earnings with £10.7 million, while Emma Walmsley, CEO of GlaxoSmithKline, emerged as the highest-earning female CEO, earning £8.45 million.
Ben van Beurden, former CEO of energy giant Shell with earnings of £9.7 million, and Bernard Looney of BP with earnings of £10 million, ranked among the top six earners. Both companies reported record profits due to surging energy prices.
The study, analyzing CEO remuneration across all companies on the FTSE 100 index using 2022 annual reports, indicated that median pay rose over £500,000 compared to 2021. This trend persisted as the figure had plummeted to £2.46 million in 2020 during the peak of the pandemic.
The High Pay Centre attributed this rise partly to post-lockdown economic recovery and incentive-based compensation tied to profitability and stock prices.
However, earnings still fell short of the levels seen in 2017, when they reached £3.97 million.
The gap between CEO pay and the wages of other workers widened further in the past year, according to the think tank.
'Extremes' The Trades Union Congress (TUC) deemed the report a reflection of "grotesque extremes" in the UK.
Paul Nowak, General Secretary of the TUC, remarked, "We need an economy that delivers better living standards for all - not just those at the top."
Conversely, the Adam Smith Institute, an economic think tank, criticized impulsive criticisms of CEO pay and emphasized the need to focus on broader economic benefits.
In response to the report, AstraZeneca explained that only 12% of Sir Pascal's pay was fixed, while the remaining 88% was tied to share price and performance. The firm noted an 81% rise in its share price over the past five years.
The company also highlighted that, on a global scale, CEO pay was below that of major pharmaceutical competitors.
BP, Shell, and other energy firms have faced scrutiny over their profits amidst soaring energy prices driving up living costs.
Shell stated that the £9.7 million figure represented Mr. van Beurden's total remuneration package, comprising a £1.42 million salary, a £2.59 million bonus, a £4.9 million Long Term Incentive Payment, in addition to pension and other taxable benefits. A spokesperson stressed that the firm's executive remuneration was benchmarked against various European multinational companies, and historical data demonstrated competitive pay for senior leaders over the past decade.
Although CEO pay is disclosed as a single figure, it typically encompasses more than just a base salary, incorporating bonuses, incentives, and pension payments.
The High Pay Centre noted that base salary constituted only 21% of average FTSE 100 CEO remuneration, sharply contrasting with most UK workers.
Gillian Wilmot, who oversees remuneration committees in listed and private companies, likened the highlighted companies to the top tier in their field. She likened the comparison to "half a dozen premiership footballers compared to most people in sport," cautioning against a skewed view of the business landscape.
Wilmot also emphasized the need to diversify the talent pool for executive roles, which currently lacked gender diversity.
Outside of major corporations, average worker wages struggled to keep pace with rising costs, particularly in energy and food, during the previous year and the ongoing year.
Consumer price inflation stood at 6.8% in the year leading to July. It remained notably higher for the majority of 2022, peaking at 11.1% in October. This translated to an average over 10% increase in prices compared to the previous year.
The latest figures from the Office for National Statistics revealed that regular pay growth, excluding bonuses, rose by 7.8% over the three months leading to June, in comparison to the previous year. However, once adjusted for inflation, wages actually decreased by 0.6%.
Governor of the Bank of England, Andrew Bailey, cautioned against substantial pay hikes to curb inflation last year. His remarks elicited backlash from unions and government dissociation from his stance.
Luke Hildyard, Director at the High Pay Centre, asserted that in a time when households grappled with living costs, a model favoring half-million-pound pay increases for already affluent executives indicated a flaw in the system.
The think tank called for mandatory inclusion of at least two elected workforce representatives on remuneration committees determining executive pay. Photo by Phil Whitehouse, Wikimedia commons.