The average salary for chief executives fell by 13% between 2017 and 2018, but they still earned 117 times more than the average UK full-time worker, a report has found.
A boss of one of the UK’s largest listed 100 companies earns £3.5m a year on average, the CIPD, the professional body for HR found.
The average full-time worker in the UK earns £29,574.
The report also showed a continued big gender gap at the top of big firms.
In 2018, only six of the FTSE 100 companies had a female boss, down from seven in 2017.
The CIPD analyses executive pay, together with the High Pay Centre think tank every year.
CIPD chief executive Peter Cheese said: the gap between pay at the top and bottom of firms remained “unacceptably wide”.
“We must question if CEOs are overly focused on financial measures and are being incentivised to keep share prices high rather than focusing on the long-term health of their business,” he said.
High Pay Centre director Luke Hildyard said: “There is still more to be done to align pay practices with the interests of wider society.”
He added it was important to “give the public confidence that our biggest businesses are working for the good of the economy as a whole, rather than the enrichment of a few people at the top”.
The CIPD and High Pay Centre made a number of recommendations:
- Pay for the top 1% of earners should be disclosed
- Consider wider workforce reward practices, and understanding of organisational culture, fairness and investment in people
- Link chief executive pay to both financial and non-financial measures of performance
- Simplify chief executive reward packages and ensure they are linked to fewer and more meaningful measures of performance
For the first time, the study also looked at pay in the FTSE 250 companies, the 250 largest firms listed on the stock exchange after the FTSE 100 firms.
If found that, in contract to FTSE 100 pay, the salaries of chief executives in this group had stayed relatively steady. Pay averaged £1.58m in 2016 and 2018 with a 2% rise to £1.61m in 2017.
The drop in chief executive pay was welcomed by trade body The Investment Association.
Its director of stewardship and corporate governance, Andrew Ninian, said that this year, more than 50 companies had promised to cut their executive pensions because of a campaign by shareholders.
He added: “Investors have repeatedly highlighted their concerns with excessive CEO pay, so the fall in pay is a welcome sign that companies are beginning to listen.”
However, unions were angered by the total pay still being earned by chief executives every year.
Frances O’Grady, general secretary of the Trades Union Congress (TUC), said: “It would take most workers two lifetimes to earn what top execs get in a single year. That’s not right.
“This shocking pay gap won’t change without major reform. We need new rules to give workers seats on executive pay committees. This would help bring some much-needed common sense and fairness to boardroom pay.”
And GMB union general secretary Tim Roache said: “It’s an absolute scandal the average worker will have to graft for more than a century to earn the same pay a CEO gets in just a year.
“GMB has never been against people getting well paid for doing a good job – but we need a maximum pay ratio enshrined in law to keep our society fair and healthy.”