Fri, 31 March 2023

Newsletter sign-up

Subscribe now
The House Live All
By Hope Virgo
Press releases

Managers question chief exec pay levels

Managers question chief exec pay levels

Chartered Management Institute | Chartered Management Institute

3 min read Partner content

Company directors are receiving pay increases at almost twice the rate of more junior executives, new data reveals.

The Chartered Management Institute(CMI) and XpertHR said chief executive pay rose five times as much as that of the average executive.

CEOs are earning 30% more than forecast on the basis of salaries recorded when the National Management Salary Survey first took place 40 years ago.

The differences are largely due to sharp percentage increases in bonus payments at top levels, compared with previous years.

Ann Francke, Chief Executive of CMI, said: “It’s hard to believe that company directors and CEOs have seen such a big leap in bonus payments when the UK’s economic performance remains so sluggish.

“If organisations aren’t performing, leaders shouldn’t get these bumper rewards, especially when pay increases for all other management levels have been so much smaller.”

The salary data, taken from more than 43,000 executives in 180 UK organisations, shows that basic salaries plus bonuses rose just 3.0% on average over the last year, in line with a 3.0% increase the year before and trailing behind retail price inflation.

In contrast, while the average basic salary for all Directors increased by just 2.7%, the figure jumps to 5.3% over the past year when bonus payments are accounted for.

Chief Executive basic salaries increased by just 1.8%, but when bonuses are added in the percentage increase leaps to 15.8%. In stark comparison, the figures released this time last year showed a salary plus bonus decrease for Chief Executives of 0.5%.

The first National Management Salary Survey was compiled in 1973.

Chief Executives are earning 30% more now than would be expected from the 1973 data, while middle managers now earn 28% less than the 1973 figures predict.

In 1973, average salaries stood at £3,855 for a middle manager and £10,600 for a Chief Executive, compared to £43,456 and £215,879 respectively today.

“A loaf of bread that cost 11p in 1973 might cost you nearly fourteen times as much today,” Ms Francke said.

“By comparison, the average CEO is taking home nearly 20 times as much as in 1973 and that’s 30% more than we would have expected. The question is, do today’s CEOs really add 30% more value?

“Those at the top have benefited from soaring pay over many years, while mid-level managers and others have been left behind. Compounded by this year’s pay rises at the top, bosses run the risk that this pay gap will leave staff disillusioned and disengaged a time when motivated, engaged employees are vital for business success.”

Mark Crail, Head of Salary Surveys and HR Benchmarking at XpertHR, says: “Through good times and bad, those at the very top have enjoyed pay rises over a period of 40 years that have opened up a massive gap, not just with workers on the shop floor but with middle and even relatively senior managers. In 1973 when we launched this survey, a typical chief executive earned less than three times as much as a middle manager; today they earn nearly five times as much. This isn’t just a short-term boost for top executives, it’s a big long-term change in society.”

PoliticsHome Newsletters

Get the inside track on what MPs and Peers are talking about. Sign up to The House's morning email for the latest insight and reaction from Parliamentarians, policy-makers and organisations.

Read the most recent article written by Chartered Management Institute - Management Degree Apprenticeships: New CMI Data Challenges Misconceptions

Engineering a Better World

The Engineering a Better World podcast series from The House magazine and the IET is back for series two! New host Jonn Elledge discusses with parliamentarians and industry experts how technology and engineering can provide policy solutions to our changing world.

NEW SERIES - Listen now

Partner content
Connecting Communities

Connecting Communities is an initiative aimed at empowering and strengthening community ties across the UK. Launched in partnership with The National Lottery, it aims to promote dialogue and support Parliamentarians working to nurture a more connected society.

Find out more