CEOs Take In 63x More Than Employees As Pay Gaps Skyrocket Post-Pandemic
- Published: 7th June 2022, 16:25
One consequence of the pandemic was that pay ratios between CEOs and their employees began to fall, but new research has indicated that these ratios are once again rising to new highs. MoneyTransfers.com has unpacked the data from new research and found a strong correlation between the industries with the lowest CEO/employee pay-ratios and the highest paying UK companies.
High Pay Centre’s analysis of FTSE 350 pay ratios (released May 2022) has revealed that the median CEO/median employee ratio across the FTSE 350 was 44:1 in 2020/2021 – a drop in ratios from 2019/2020, where the ratio was 53:1. This decrease is also reflected in the figures for median CEO/lower quartile employees, where the ratio dropped from 71:1 to 59:1 – meaning that on average, a CEO earned 59 times more than an employee.
These figures suggest that the pandemic had a significant impact on pay ratios, with CEO pay dropping significantly as business performance was affected by COVID-19 and global lockdowns.
Media and financial services have the lowest average pay ratio
Looking at the disparity between industries, media has the overall lowest median CEO/median employee pay ratio at just 29:1, although financial services are a close second at 30:1.
This correlates with the GlassDoor 2021 report of the highest paying companies in the UK; the top 10 companies listed are all within the tech, consulting, and investment banking sectors. Companies making the top 10 include Sales Force, Facebook, and G-Research.
By comparing the two datasets, we can suggest a couple of conclusions. Firstly, employees in the finance, tech, and media industries are likely to be considered highly-skilled, and thus earn a higher median salary compared to more service-based industries such as retail.
Secondly, indirectly-employed workers such as cleaners and kitchen staff are not counted in these calculations – which could close the differences between industries if taken into account.
Early 2022 pay-ratio disclosures indicate a widening gap
The report suggests that even early indications of pay ratio disclosures support the likelihood that the gap will once again widen even further in 2022. According to the report, out of the companies who had disclosed their pay ratios already in the first quarter of 2022, the median CEO/median employee ratio had almost doubled compared to last year.
The 69 companies that have submitted their reports show a median pay ratio of 63:1 in the first quarter of 2022 – compared to 34:1 for the same companies in 2021. It’s likely, then, that the diminished pay ratios in 2020 were merely a result of impacted business performance due to the pandemic, rather than a shift in attitudes from CEOs.
In 2021, 28 companies of the 350 reviewed had a CEO/median employee ratio of over 100:1. In comparison, 45 companies had the same ratio in 2020.
Despite the decrease in numbers, this still equates to 14% of the FTSE 350 companies within the report having widely high pay ratio gaps. Broken down, if we assume that an employee at one of these companies earns an average of £40,000 per year, the CEO of that same company would be earning upwards of £4million a year.
With the cost of living crisis sweeping across the UK currently, pay ratios are a politically-charged and sensitive area of debate.
The High Pay Centre report surveyed public opinion on pay ratios and found that 62% of respondents felt that CEOs should earn between 1 and 20 times that of an employee, with the largest category being 29% of respondents saying that a CEO should be paid between 1 and 5 times more than their lower and mid-level employees.
For reference, public opinion is more in-line with the typical pay-ratios seen in the 1980s than the astronomical differences in pay we can see now.
The poll clearly shows that the public are strongly in favour of a fairer distribution of income within companies – something likely to be only more changed by the fact that incomes are not rising comparably with inflation, energy bills, and other daily expenses.says Jonathan Merry, CEO of MoneyTransfers.com
Yasmin Purnell is a Content Writer and Editor for MoneyTransfers.com. Having over 5 years’ experience writing across a range of industries including finance, insurance, and travel, Yasmin joined the team with a mission to make international money transfers and everything they encompass accessible to all.