Persimmon boss tops the list of CEO pay
The boss of York-headquartered housebuilder Persimmon has topped the list of FTSE 100 chief executive pay, receiving 22 times the amount he was paid the previous year.
The highest paid CEO in the financial year ending 2017 was named as Jeff Fairburn, who received £47.1m, 22 times his 2016 pay, according to an annual report by the Chartered Institute of Personnel Development (CIPD) published this morning.
The report criticised CEO reward increases which outstrip pay rises for the wider workforce, fuelling questions over fairness and governance in Britain’s biggest businesses. The CIPD said this year’s analysis had been affected by “two very large payouts” for the CEOs at Persimmon and Melrose Industries – £47.1m and £42.8m – and it therefore had to look at median increases instead of mean.
It found there was an 11% median rise in total FTSE 100 chief executive pay between 2016 and 2017, despite prominent criticism from the investor community and the Government over excessive CEO pay awards in the past year.
According to the CIPD, the median pay for FTSE 100 chief executives was £3.93m last year, up from £3.53m in 2016. That compared with a 2% increase for UK workers as a whole, it said.
The news comes as Persimmon recently became the centre of a storm for the huge bonuses paid to its top bosses.
The group came under fire over management pay after awarding Fairburn a £75m bonus.Chief executive pay rose by 11% last year to almost £4m, with t
He was to collect a total of £110m worth of bonus shares, but agreed to give up half of the second half of the award, also announcing he was to give a substantial amount to charity.
The HR industry and people development group also found bosses were paid on average 145 times more than their employees – up from 128 times in 2016.
Peter Cheese, chief executive of the CIPD, said: “Despite increased investor activism and the planned introduction of pay ratio reporting, the evidence suggests that very little is changing when it comes to top pay in the UK. It’s disappointing to see that CEO pay has held up in the face of increasing pressure when average pay across the workforce has barely shifted in recent years. However, pressure is building in the system.
“Given the ongoing issues of trust in big businesses and a push for greater transparency, it really is time businesses and boards put greater scrutiny on high pay, and that they think much more objectively about what they are rewarding CEOs and how. Financial performance alone does not signify CEO success, and must be balanced with development of the organisations long-term sustainability and value. Investors and boards need to look beyond share price, and consider a much broader range of indicators that show how that individual is performing for the long-term good of the business, its workforce and other stakeholders.”
Rachel Reeves MP, and chair of the Business, Energy and Industrial Strategy Committee, which is managing an enquiry on‘Corporate Governance – Delivering on fair pay’, said: “Excessive executive pay undermines public trust in business. When CEOs are happily banking ever larger bonuses while average worker pay is squeezed, then something is going very wrong. Recent revolts on pay awards show that shareholders are increasingly sharing this frustration at unjustifiable pay awards. Executive pay must match performance.
“Boards and Remuneration Committee Chairs need to ensure that CEOs are rewarded for delivering genuine long-term value for the company. If Boards and Remuneration Committee chairs are so out of touch they are prepared to waive through off-the-scale reward packages, then shareholders must strike back and hold them to account. If businesses don’t step up on executive pay, then Government will need to step in.”
The CIPD and the High Pay Centre will publish a new report this autumn which examines how the remuneration committee can be reformed to deliver better outcomes on pay – for low, middle and top earners.
