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Top British Bosses Will Have Earned More By Today Than an Employee Will All Year

Dubbed "Fat Cat Tuesday," by the end of today top UK CEOs will have earned more than the average UK employee does all year, according to calculations based on government figures.

by VICE News
Jan 5 2016, 12:15pm

An Occupy London holds a banner outside the Bank of England in August 2012

It's day two of most of the UK's working year, and it's been christened "Fat Cat Tuesday." This afternoon, Britain's top bosses will have earned what the average employee will earn over the course of the entire year, according to calculations released by the High Pay Centre (HPC) think tank.

The average annual salary for a CEO of the UK's top 100 companies in 2014 was 4.96 million pounds ($7.28 million), according to HPC, who use the UK government's "single pay" measure — the total pay received by an executive in a given year, including bonuses, but not including deferred bonuses and long-term incentives.

Meanwhile, the median salary for a full-time worker in the UK was 27,645 pounds ($40,565), an increase of 245 pounds ($359) on the previous year. This figure only covers employees who had been in their jobs for more than 12 months.

Even making "the very generous assumption" that each CEO works 12 hours a day, three out of four weekends, and takes fewer than 10 holiday days per year, said HPC, an average hourly wage of 1,260 pounds ($1,850) means that each CEO should pass the UK national average some time on Tuesday afternoon. 

Related: British Women Are Working for Free From Today Until January

The current pay gap was "unprecedented," said HPC director Stefan Stern, with the ratio of average FTSE 100 CEO to average UK fulltime employee pay having increased from 40/50-1 to 180/1 in the past 20 years.

Even larger gaps can be seen in the US, with the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) — a federation for US unions — finding that in 2014 the CEO-to-worker pay ratio was 373-1, with the average rank-and-file worker earning an annual salary of $36,134.

Stefan Stern, HPC director, told VICE News he agreed that bosses should be paid more for doing important jobs, but the gap should not be so vast.

"I'm not saying everyone should get paid exactly the same because there's a hierarchy and good people at the top should get paid well, (...) but there's a team of people, [the bosses] delegate," he said. "The real problem is if the leaders pay is so far out of sight from what everyone else is getting you've got a perverse incentive there. Is the leader really interested in the future of the organisation or is their interest just in themselves?"

He did not believe the rise of average CEO pay could be justified. "I don't believe running a company had become that much harder in the last 20 years," he said. "I'd like to think it's reached a peak and people are beginning to realise that it's not very good for the companies. It's not good for the bosses. It's good for their bank balance, but it's not good for their leadership."

Related: Do We Need a Global Tax on Wealth?

Employees should have better representation on renumeration committees who set the pay with shareholders, he said.

"I actually think it's bigger than legislative change, i think what we need is a different attitude altogether and we need some executives to say that this pay is just excessive," though, he conceded, "you might say this is against human nature."

Sam Bowman, executive director of free market think-tank the Adam Smith Institute, dismissed the research as "pub economics."

"Despite consistent attacks on chief executive pay, the HPC has never told us how much they think CEOs are actually worth. Their complaints are the hand-waving of pub economics, not serious analysis — 'Surely you don't think executives can be this valuable to firms?', or 'Surely you don't think executives are more important now than they were forty years ago?'

He added: "Chief executives can be worth quite a lot to firms, as is shown by huge moves in company share prices when good CEOs are hired, or bad CEOs are fired. Steve Jobs can make a firm; Steve Ballmer can break a firm. The High Pay Commission's complaints only make sense if you assume firms don't actually care about making money — which is to say, they don't make sense at all."

Meanwhile, Trade Union Congress General Secretary Frances O'Grady said the calculations showed the UK government was not making good choices for a fair economy. "Every worker deserves a fair share of the wealth they help create," she said. "But the average weekly wage is still worth £40 a week less than before the financial crisis. The government must start making the right choices to deliver a fair economy with fair pay, like giving workers more collective pay bargaining rights."

Related: The Resurgence of the Labor Movement: The Year in Workers' Power

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