More than half of the UK public support capping chief executive pay in relation to average employee wages, a survey has revealed.
Research from the High Pay Centre (HPC) think tank found that 55 percent of people support measures to cap executive pay to reduce the gap between high earners and people on low or middle level incomes.
The survey results were part of the think tank’s policy recommendations to cap ‘CEO-to-worker’ pay for public service providers, such as water or social care.
Executive pay and pay inequality has been a controversial topic for many years. There was public outcry in 2022/23 when executive pay awards in the water industry exceeded £10 million in spite of the industry discharging large amounts of sewage into Britain’s seas and rivers.
Care home executives have also been accused of pocketing millions in financial rewards, while their residents lived in unsafe, unsanitary and substandard conditions.
Pay cap levels
More than a fifth (22 percent) of survey respondents thought pay for CEOs of the UK’s biggest businesses should be limited to between one and five times that of their lower- and mid-level paid employees.
The survey, conducted with 2,007 UK adults by Survation and funded by the abrdn Financial Fairness Trust, also showed that 19 percent said CEO pay should be between five to ten times that of employees and 13 percent said ten to 20 times worker pay.
In its ‘Charter for fair pay’, HPC said: “The argument that [capping executive pay] would hinder the capacity of companies to attract talented leaders should be offset against the fact that a cap of 20 or even ten times median earnings would still enable pay awards in the low hundreds of thousands, which would put the recipient comfortably inside the top 1 percent of UK earners.”
Expand pay ratio reporting
The charter also called for an expansion of pay ratio reporting to ensure consistent disclosure of what all employers spend on their top earners.
HPC said that if companies disclosed high earners’ pay, stakeholders could better assess the value such people provide compared to other fund uses including pay rises for lower earners or research and development investment.
It added that more detailed information about what employers spend on the highest earners can inform the negotiating position of individual workers or trade unions.
‘Worker directors’ to set pay
Further policy recommendations include introducing a right for workers to know how their pay compares to pay across their organisation, and to create seats for ‘worker directors’ on company boards. The latter policy had substantial public support with 51 percent in favour, the survey revealed.
Under the policy, worker directors would hold significant voting rights on key board decisions such as remuneration policy, company strategy and environmental, social and governance (ESG) initiatives.
The HPC said: “How employers distribute their expenditure on pay is a key determinant of living standards. HPC research has previously highlighted how some large companies spend tens of millions on a small number of executives, creating significant opportunity costs in terms of pay for lower earning workers or investment in research and development. Studies have also documented the way that wide intra-company pay gaps can have a negative impact on employee morale and productivity.”
