Seven-figure salaries are eroding public trust in business, and that’s a threat to success, say members
The Institute of Directors is one of the UK’s most renowned and esteemed business organisations.
With its Pall Mall headquarters and its allegiance with the biggest and most established companies in the country, one might reasonably expect it to leap to the defence of the big bonuses and super-salaries common among our biggest publicly-listed companies.
After all, many of those companies and their directors are its members.
Yet in a new survey of more than 1,000 IoD members, more than half (52%) said that “anger over senior levels of executive pay” are a threat to the public’s trust in business.
Almost half (48%) agreed that falling trust in business is a significant threat to their business’ success. Only 26% of respondents said falling trust in business was not an issue for them.
High Pay Centre director Deborah Hargreaves said the survey results “destroy” the idea that speaking out against very high executive pay is “somehow anti-business”.
She said: “Outside the boardrooms of big corporations, ordinary small and medium-sized business owners are as appalled by the culture of top pay as anybody else.
“When big business leaders rake in seven- or eight-figure pay packages every year […] we are clearly seeing a corporate governance failure rather than a fair and functional free market.
“Ordinary workers, customers and wider society, not to mention shareholders, are being ripped off.”
In December we learnt that the average pay for FTSE 100 bosses was £2.8m, up from £1.9m the year before.
In October, research showed that the average FTSE 100 director earned 120 times more than an average full-time employee.
We also discovered at the start of January that the typical FTSE 100 CEO took home more money in their first two working days of the year than the average full-time British workers will earn in the whole of 2015.
Simon Walker, IoD director general, said performance-related pay can play a key role in business success, but that “in some corners of corporate Britain pay for top executives has become so divided from performance that it cannot be justified”.
The IoD has become more vociferous about high exec pay recently. In November, it called a £25m pay package on the table fora BG Group exec “inflammatory” and “excessive”.
Walker added, in a statement about the new survey: “Runaway pay packages, golden hellos, and inflammatory bonuses are running the reputation of business into the ground.
“Large companies need to look closely at the role excessive pay is playing in fuelling an anti-business backlash from the public and some politicians.”
What else is worrying IoD members about the public’s perception of business?
Just over half (51%) said that the media’s unsympathetic portrayal of business was an issue, and the same amount said that mis-selling products is a threat.
Do you think seven-figure salaries are justified in some cases? Or is high pay out of control? Let me know @sophiehobson and in comments below
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