COMPANIES paying their chief executives more than 100 times the
pay given to their average employee need to be challenged by
investors armed with questions that will penetrate the opacity of
annual reports. This is one of the conclusions of a new report from
the Ecumenical Council for Corporate Responsibility (ECCR).
The report, Using Ethical Investment to Close the Gap,
published on Monday, notes that, today, the average FTSE 100 CEO
earns approximately £4.7 million per year, 130 times the average
FTSE 100 employee. In 1970, the differential was approximately
It acknowledges that "few companies are prepared to make
disclosures that would genuinely help investors understand how pay
decisions are made, and make informed judgements about whether or
not pay is disbursed fairly across the company". But it provides a
list of questions that investors can ask, including scrutiny of the
ratio of payment between those at the top and the average
"For too long investors have presided over a corporate system
that over-rewards the elite whilst leaving many employees at
poverty level," the executive director of ECCR, John Arnold, said.
"We want individual and institutional investors to join their
church-investor colleagues, and revisit their responsibilities, as
owners of businesses, to challenge companies to tackle low pay and
Just 15 of the FTSE 100 pay the Living Wage. The new Living Wage
rate is due to be announced next week. On Monday, the Resolution
Foundation reported that the proportion of employees in low-paid
work (two-thirds of median hourly pay: £7.69 an hour) increased
from 21 to 22 per cent last year, to 5.2 million. It concluded that
the UK had among the highest proportion of full-time, low-paid
workers across the OECD.
Last week, the Social Mobility and Child Poverty Commission
called on the Government to "forge a new settlement" to make
Britain a Living Wage country by 2025. In its second annual report,
it warned that, plagued by "endemic levels of low pay", and with
millions trapped in dead-end jobs, Britain was morphing into a
"permanently divided nation".
It called on the next Government to "draw a line under the old
political consensus that the benefits system could be the main
source of income growth" for those in low-paid jobs. Employers
should pay more, parents should work more hours, and utility
companies, financial firms, and retailers, should "end the
perversity of the poverty premium which forces the poorest families
to pay the highest prices for many of life's essentials".