UK CEO needs to work until 1pm on January 4th, 2019 to earn as much as what average employee earns in the entire year

Friday 4 January 2019 is “Fat Cat” Friday. In just three working days, the UK’s top bosses make more than a typical full-time worker will earn in the entire year, according to calculations from independent think tank the High Pay Centre and the CIPD, the professional body for HR and people development.

The average (median) full-time worker in the UK earns a gross annual salary of £29,574. “Fat Cat” Friday recognises that in 2019 the average FTSE 100 CEO, on an average (median) pay packet of £3.9 million, only needs to work until 1pm on Friday 4 January 2019 to earn the same amount. The £3.9 million figure was calculated by the CIPD and the High Pay Centre in their 2018 analysis of top pay and it marks an 11% increase on the £3.5 million figure reported in their 2017 analysis. The pay increase means that FTSE 100 CEOs, working an average 12-hour day, will only need to work for 29 hours in 2019 to earn the average worker’s annual salary, two hours fewer than in 2018.

The CIPD and High Pay Centre are highlighting the problem of rising executive pay in a new report launched today. The report, RemCo reform: Governing successful organisations that benefit everyone, identifies the shortcomings of the remuneration committees (RemCos) charged with setting executive pay and calls for them to be significantly reformed. In particular, it highlights:

  • the myth of ‘super talent’ as a factor that continues to drive excessive pay with one remuneration committee chair commenting: “It’s nuts… and nuts has become the benchmark”.
  • how there needs to be much greater diversity among those responsible for setting CEO pay, both in terms of their ethnicity and gender, for example, but also their professional backgrounds and expertise in order to combat ‘group think’.
  • how current pay mechanisms contribute to the problem of high pay. In response, the CIPD and High Pay Centre recommend replacing long-term incentive plans (LTIP’s) as the default model for executive remuneration with a less complex system based on a basic salary and a much smaller restricted share award. This would simplify the process of setting executive pay and ensure that pay is more closely aligned to executive performance.

The CIPD and High Pay Centre are calling for RemCos to ensure that CEO pay is aligned more appropriately to rewards across the wider workforce and that their contribution is measured on both financial and non-financial measures of performance.

Whole story here.

When is the last time you saw such a CEO?

Superstar CEOs underperform

CEO superstars aren’t all they’re cracked up to be, argue two UCLA economists in a paper posted to the National Bureau of Economic Research’s website this week

After receiving awards from publications like Business Week and other organizations,

[superstar] CEOs extracted more money from their companies — mostly in the form of stock and options — than their nonwinning counterparts. But in comparison, their companies’ returns and stock performance suffered. (thanks WSJ)

Can Gates, Soros and Branson create a better world?

Spiegel Magazine tries to answer the question.

CEOs and their libraries

Phil Knight, Steve Jobs, Dee Hock, Sidney Harman and what their libraries reveal about who they are… or how they think.

Poetry speaks to many C.E.O.’s. “I used to tell my senior staff to get me poets as managers,” says Sidney Harman, founder of Harman Industries, a $3 billion producer of sound systems for luxury cars, theaters and airports. Mr. Harman maintains a library in each of his three homes, in Washington, Los Angeles and Aspen, Colo. “Poets are our original systems thinkers,” he said. “They look at our most complex environments and they reduce the complexity to something they begin to understand.” (NYT)

CEOs behind bars

Ten of the most high-profile chief executives and chief financial officers behind bars in the US and the UK are serving a total of 134 years. The oldest will be an octogenarian when he is released, assuming he serves his full sentence, and the youngest will be 47.

  1. Bernard Ebbers, WordCom ($11 billion accounting fraud)
  2. Scott Sullivan, WorldCom ($11 billion accounting fraud)
  3. Dennis Kozlowski, Tyco International (stole more than $150 million from the company)

Can you tell who the other seven are?

Should CEO disclose DUI?

If a CEO gets dinged for driving under the influence, should a company have to disclose it?Answer and discussion here: Herb Greenberg: I Got it Wrong: US Airways Should’ve Disclosed CEO’s DUI