The global pay debate is hotting up, but finding effective solutions to the growing disparity between executive and workers’ pay won’t be easy.
The divisive issue of chief executive pay has periodically flared up for decades in the US and UK. But increasingly the debate is becoming global – with media outlets from India to New Zealand picking up growing concern over the widening gulf between corporate leaders and the average employee.
A recent study in New Zealand by accounting lecturer Helen Roberts, garnered headlines by revealing that typical CEO pay had just breached US$1m for the first time. Pay at the top has been increasing at 7% a year since 1997, compared to just 3.7% for the workforce overall, Roberts calculated. Meanwhile a recent “Hindustan Times” article took aim at the lofty salaries drawn by India’s chief executives. And in the UK, prime minister Theresa May has found time amid the Brexit negotiations to focus on the issue, backing new rules that will oblige companies to publish a ratio between the pay of bosses and the average for the wider company.
‘This is a debate that typically dominates the headlines for a few months before dying down again’, says Paul Hodgson, an expert in executive compensation. ‘Now the swing to political populism in the US and the UK – with the Brexit vote and the election of Donald Trump – has given the issue a new sense of urgency. Excessive executive pay is seen by critics as just one part of a capitalist system where the rules are rigged in favour of the elites’.
Resentment over the scale of executive pay seems to have been intensified by the sluggish rate of salary increases in most developed economies over the past decade or so. In the UK average total pay has risen by 33.7% since 2005, only slightly more than the 32.2% rise in consumer prices, according to figures from the Office for National Statistics.