How much more should the top earner in a company be paid than the lowest earner?
Ten times? 50 times?? 100 times???
A new report from the High Pay Centre notes that, since the late 1990s, executive pay has grown from 60 times that of the average UK worker to nearly 180 times and that more radical action is needed if the gap between top bosses and everyone else is to return to more proportionate levels.
The Government should consider requiring companies to cap executive pay at a fixed multiple of their lowest-paid employee, according to the High Pay Centre think-tank.
Though a vote in Switzerland proposing a maximum pay ratio of 12:1 between the highest and lowest earners was defeated last year, UK companies John Lewis (for whom my brother works) and TSB have already adopted a less radical 75:1 ratio. The High Pay Centre notes that different ratios could be applied to different sectors, based on the advice of businesses, employees and academic experts.
The report also proposes:
- Representation for workers on company boards and the ‘remuneration committees’ that set executive pay, as well as on city pay regulators.
- A national ‘inequality target’ based on previous legally-binding commitments to reduce child poverty and carbon emissions
- Compulsory profit-sharing, so that if a company does well and the CEO receives a large bonus payment, ordinary workers also receive a windfall.