Fat Cats or Top Dogs? In defence of high CEO pay
Every year in January the High Pay Centre (they’re “an independent, non-partisan think tank focused on the causes and consequences of economic inequality, with a particular interest in top pay,” since you asked) releases its Fat Cat report, pointing out the day on which a top CEO’s earnings surpass the median UK salary.
This year, January 6 was the day on which these Fat Cats surged past the £40K mark. Every year, trade unions send out a press release to accompany the findings, raging against the supposedly egregious CEO remuneration.
The High Pay Centre – which is funded by a variety of trusts plus the Church of England Pension Board and, bizarrely, asset manager abrdn – also campaigns for a Fat Cat Tax, where firms would face a corporation tax surcharge for any C-suite remuneration that “exceeds a specified multiple of the median UK salary.”
Fortunately, not even this government appears interested in pursuing such a destructive policy – though it would doubtless find fertile ground with the Greens.
The simple truth is that life at the top of a FTSE 100 company is difficult, uncertain and increasingly lonely. A report released this week by AlixPartners found that 70 per cent of CEOs felt pressured by high levels of “disruption” facing their business or sector, while fewer than 4 in ten of their C-suite colleagues felt the same.
In other words, the CEO spends a lot more time worrying than the rest of their executive team. The report, based on interviews with more than 3,000 CEOs and senior executives in 11 countries, said top bosses are facing “mounting pressure and increasingly bearing the weight of that accountability alone.”
The average tenure for a FTSE 100 CEO is just under five years. If they get it right, the rewards are felt by shareholders, employees, customers, suppliers and the wider economy. Get it wrong, and they can be out on their ear.
I remember a FTSE 100 chairman, on the hunt for a new CEO, telling me “there are about a dozen people in the world who could do this job.” The remuneration was bound to be high, but so were the stakes.
Attracting and retaining the right person for the top job – a job that gets harder every year – cannot be done on the cheap.