Siobhain McDonagh: CEO pay is soaring, while working people struggle. How can that be fair?

Posted On: 
21st January 2019

Iconsistency and injustice has grown to become the norm throughout the FTSE 100. The enforcement of whole company pay policies would be the first step towards a fair deal at work, writes Siobhain McDonagh

The pay packet for a FTSE 100 CEO has risen by 11 per cent over the last year alone, writes Siobhain McDonagh

By lunchtime on Friday 4th January, the UK’s top chief executives had earned more than their average employees would over the course of this entire year, taking home astronomical figures more like telephone numbers than salaries.

While the average employee has seen their salary stagnate, the pay packet for a FTSE 100 CEO has risen by 11 per cent over the last year alone, soaring to a staggering average of £3.9m per year.

How can that be right, just or fair?

For perspective, a FTSE 100 CEO is paid an estimated 132 times more than a police officer, 140 times more than a teacher, 165 times more than a nurse, and an astronomical 312 times more than a care worker. These indefensible ratios are a slap in the face for hard-working employees across our country who, at the very least, expect to take home a fair day’s pay for a fair day’s work.

For some commentators, this is a debate about those at the top being paid well. Others argue for a salary cap or for a widespread cut to chief executive pay.

My call is far simpler: for consistency, parity, and fairness. For the importance of the contribution of those at the bottom to be recognised in tandem with the contribution of those at the top. For organisations to determine the pay and reward schemes of all their employees in one whole company pay policy.

Take Sainsbury’s, a pillar of the Great British high street. Under the guise of an ‘increase in basic pay’, Sainsbury’s is set to slash the salaries of 9,000 loyal and longstanding staff by up to £3,000 per year from 2020. And while new contracts for shop floor staff will see their bonus scheme scrapped, CEO Mike Coupe takes home an eye watering bonus of £427,000 as part of his £3.4m pay packet. This is a monumental injustice that, I believe, would have been prevented had the Sainsbury’s Remuneration Committee considered the pay and reward scheme for all employees at the same time in one whole company pay policy.

I’m not calling for extraordinary executive incentives like this to be scrapped. I appreciate the demands of running one of the UK’s biggest organisations. But if an incentive scheme is made available for some staff then it should be on offer for all staff, on the same terms, within the organisation. Why should any organisation have a rule for some employees that is not a rule for all?

But inconsistency and injustice has grown to become the norm throughout the FTSE 100, and across the high street, with treasured organisations like Marks and Spencer and B&Q falling foul of the expectation of organisational fairness. It is the absence of a whole company pay policy in organisations like these that has led to this unjust disparity.

The government has introduced regulations to enforce organisations to disclose and explain their pay ratios. This is a small step. But how will this ensure that such extreme pay ratios do not occur in the first place? And what will happen if, and when, they are shown to continue?

On Wednesday, the ethics of Fat Cat Friday will be debated in Parliament, with a Westminster Hall debate on ‘FTSE 100 company pay ratios’ taking place from 09:30am.

The enforcement of whole company pay policies would be the first step back to a country where hard working employees can expect to receive a fair deal at work.

Siobhain McDonagh is Labour MP for Mitcham and Morden. The Westminster Hall debate on FTSE 100 company pay ratios is on Wednesday 23 January at 9.30am

 

  • Sainsbury’s would like to make clear that under their new pay deal 93% of store colleagues will receive a pay rise. Of those losing out, the average amount that could be lost is around £400, while the number of people who could lose £3,000 is fewer than 10. The supermarket has introduced top-up payments for an 18-month period to ensure that nobody will take home less than they did before the announcement, and pledged to review its pay policy again in March 2020.