Trends Feb, 2022

What Is The Future Of CEO Pay Rates?

By Michael Bowden | Share:

As C-Suite Executives and their salaries experience increasing levels of scrutiny, question marks are being raised over the future of high CEO pay rates. Couple this with the economic impact of a global pandemic raises the question: could we be coming to the end of the high CEO salary era?

There are few professions as challenging and exclusive as that of a CEO. These hard won seats at the very top of a company’s food chain require a business mind of athletic proportions, coupled with finely-honed talents and often decades of industry experience. A C-Suite Executive has to meet high expectations that include being an emotionally invested strategic visionary who is able to make perfect decisions under pressure and be prepared to take the fall if things go wrong. As a result, a lucrative pay packet comes as standard.

So why the scrutiny? Let’s start by breaking down the numbers. The average CEO salary in the UK is £300,312, whereas the median employee pay is £34,943. This creates a wage gap of an eye watering 759%, the widest gap in all the major economies in the world. This is understandably contentious and has sparked uproar at a number of organisations. However, this is nothing new, and high rolling CEO salaries and bonuses are an accepted fact in the world of work. Outside of America, the UK continues to pay the highest CEO salaries.

However, according to the Financial Times, this year shareholder pressure has seen companies in the FTSE 100 rein in executive rewards, due to financial volatility caused by the pandemic, as well as numerous CEOs having their salaries frozen completely. Bearing in mind many more companies are now involving environment, social or corporate governance criteria in their pay policies, it would also be reasonable to conclude that the role of the CEO includes facing even more challenges and risks. However, it also makes sense that investors are seeking to stop executives from profiting during a difficult time for most workers.

So what does this mean for 2022?

Looking at the analysis from PWC in this Grapevine article, as companies slowly start to bounce back from Covid19, the same level of restraint and scrutiny when it comes to pay outcomes is expected to continue.

High Pay Centre’s Director, Luke Hildyard adds “the inequalities exposed by the pandemic and the volume of public money used to protect large businesses could strengthen the argument for measures to contain top pay and re-balance extreme income differences.”

The pandemic has undoubtedly sparked a revolution of change in the workplace. When it comes to calculating the scale of the economic impact of COVID, we can only speculate. However, giving organisations the opportunity to review and reset their company structure from the top down could be a silver lining after an extremely challenging two years. If you’d like to share your insights on the impact of the pandemic on your business, then I’d be delighted to hear from you.

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