FTSE chiefs earning 57 times average salaries as City pushes for higher pay

FTSE chief executives now typically earn 57 times more than their employees, new data has revealed, as City bosses complain that small pay packages are harming the London stock market.

Figures from the High Pay Centre showed the average ratio of FTSE 350 chief executive pay to average salary of their employees was 57-to-1 in 2022, a slight increase from 56-to-1 a year earlier.

The pay ratio between chiefs and staff was 80-to-1 in the FTSE 100, a drop from 83-to-1 a year earlier. The think tank said the pay gaps had remained “constant despite the cost-of-living crisis”.

Listed companies in the UK are required to disclose the pay ratio between the chief executive and staff. Those ratios narrowed slightly during the coronavirus pandemic, as a number of bosses took voluntary pay cuts during the crisis. However, they are now back to pre-pandemic levels.

Despite the significant gulf, senior City figures have complained that pay deals in Britain are too meagre to attract top talent. Executives and market leaders have been lobbying for greater freedom to award more extravagant deals.

Earlier this year, Julia Hoggett, the chief executive of the London Stock Exchange, argued that UK public markets were being hampered by a “lack of level playing field” with US companies, which typically hand executives much more generous compensation deals.

She said UK investors and advisors would often oppose pay deals for UK chief executives that they would approve for a US company.

A reluctance to approve big pay deals has been blamed in part for the dearth of new floats on the London Stock Exchange. There have been just 23 floats in the first nine months of 2023, compared to 34 a year earlier.

A growing group of companies are also quitting the UK for the US markets.

Top asset managers are now considering a more forgiving approach to pay in an effort to revive the flagging British stock market.

Legal & General Investment Management, the £1 trillion asset manager, has updated its policies to say it is “open” to approving US-style deals with long-term incentives, providing companies can justify why such a package is necessary. The Sunday Times first reported the change.

In the US, chief executives in the S&P 500 made on average $16.7m per year in 2022, according to data from the AFL union group, with a pay ration of 272-to-1.

The median pay deal for a FTSE 100 boss was £3.9m in 2022, the High Pay Centre said in August.

FTSE companies with some of the highest ratios of chief executive pay to median employee pay in 2022 were: Safestore Holdings, at 313-to-1; cyber security company Darktrace, where the chief executive earned 271 times the average employee; and construction giant CRH, which handed its boss 259 times the typical staff wage. 

CRH recently delisted from the London Stock Exchange and decamped to New York.

Paul Nowak, general secretary of the Trades Union Congress, said: “At a time when food and energy bills are sky-high there is simply no justification for such huge pay inequality.”