Industry leaders get their claws out for Fat Cat Wednesday
9 min read
04 January 2017
Fat Cat Wednesday represents the day on which FTSE 100 CEOs earned the average annual UK salary of £28,200 – and we’re only four days into the new year.
It’s when dates such as Fat Cat Wednesday and Equal Pay Day roll around that we are reminded why the UK has been relegated to being the most unequal nation in the developed world.
In September 2016, Oxfam unveiled that the richest one per cent of Brits owned more than 20 times the wealth on the poorest fifth (13m people). Also, the richest ten per cent own more than half of the country’s total wealth.
Of this, Rachael Orr, head of Oxfam’s UK Programme, said: “Inequality is a massive barrier to tackling poverty and has created an economy that clearly isn’t working for everyone. While executive pay soars, one in five people live below the poverty line and struggle to pay their bills and put food on the table.”
This difference in pay has only further been stressed by what the nation calls Fat Cat Wednesday. And while some have taken steps to address the situation – Grant Tornton’s Sacha Romanovitch capped her own salary, and Co-Op boss Richard Pennycock asked for a pay cut – it hasn’t stopped most bosses gaining a ten per cent rise at a time where wages are lagging behind.
“There is no end yet in sight for the rise and rise of chief executive pay packages,” said Stefan Stern, director of High Pay Centre. “In spite of the occasional flurry from more active shareholders, boards continue to award ever larger amounts of pay to their most senior executives.”
The company went on to reveal that large corporate bosses make 129 times more than their staff – a subject prime minister Theresa May promised to rectify. She deemed it to be an “irrational, unhealthy and growing gap.”
But what do industry leaders have to say on the subject? Here’s what they told Real Business:
Peter Istead, MD for Recruitment at Hudson UK
Once upon a time, pay rises were your best bet at keeping your top talent. But in the new world of work, I think businesses need to think beyond carrot-dangling even at the highest levels.
A better work-life balance, a sense of purpose and the chance to boost experience profiles in the workplace are becoming increasingly important to business leaders and employees at every level – it’s time people gave serious thought to these benefits.
First, you have to establish a dialogue with people, and find out what it is they want as individuals – there’s no one-size-fits-all policy!
Amanda Fennell, senior director of Xactly EMEA
High executive salaries and bonuses have attracted public criticism for many years, and Fat Cat Wednesday can be a focus for this discontent. But workers aren’t simply angry because bosses are highly paid; it’s because often executive bonuses are awarded without any clear link to value.
Moreover, while bosses receive huge bonuses, many workers in the UK don’t have access to any kind of variable pay, despite one in four workers stating that a financial bonus is their main motivation. Bonuses are an extremely powerful tool for motivating workers and improving productivity, if they are used in the right way.
We must move from the old-fashioned salary economy to the performance economy: rather than paying people based on their position and tenure, employees must be rewarded for their output.
Read on for more opinions on Fat Cat Wednesday
Geoff Pearce, VP of reward at NGA Human Resources
It is a fact of life that some people will always be earning more than others. But firms need to be aware that Fat Cat Wednesday will make staff on all levels question their wages. This can be particularly concerning as employees often start looking for a new job in January and their salary can be a key consideration when deciding whether to move on or not.
With the gender pay gap still being wide open, companies need to take a good look in the mirror and evaluate how fair and equal salary policies are. Fairness, in line with level and experience, is essential in keeping employees happy and engaged.
High pay is clearly on the government’s agenda though following the publication of the Corporate Governance Reform White Paper in November 2016. The review will consider issues including shareholder rights, the role of remuneration Committees and transparency.
Ben Willmott, head of public policy at the CIPD
There is still a shocking disconnect between the pay for those at the top and the rest of the workforce at too many FTSE companies, despite efforts to rein in executive pay in recent years. The situation is likely to get worse before it gets better as higher inflation in 2017 will mean many frontline workers will face a pay squeeze.
It follows a CIPD study showing 59 per cent of staff identify CEO pay as an issue that demotivates them at work. The message from the workforce is clear: “the more you take, the less we’ll give”.
Business leaders need to ensure there is a link between overall top pay, organisation performance and the rewards of the wider workforce or risk reducing employee engagement and productivity at work.
James Reed, chairman of REED recruitment
This debate doesn’t feel productive. Having ridiculous amounts of money doesn’t make you happy and being deeply envious of others doesn’t either. And as a pragmatic person I believe there is nothing to gain in slating others. Rather, we should be focusing our attention on investing in education and skills for as many people as possible.
We shouldn’t get sidetracked by Fat Cat Wednesday. Their salaries are ludicrous but they don’t represent the rest of the working population. We should focus our attention on pushing skills and wages up. So let’s stop tearing each other down and help the talented and ambitious individuals who reside in the UK. We all know that the pull to London is difficult to resist for many graduates, but we need to invest and ensure ambitious graduates have opportunities nationwide.
From careers advice in schools, to work experience and upskilling let’s arm our workforce with the knowledge and the skills needed to succeed! And why do cats always get such bad press anyway?
Professor Vikas Shah, CEO of Swiscot Group
We need to rethink how performance is rewarded across business period. We have a situation where the c-suite are incentivised often on short-term (quarterly) performance whilst employees are (usually) aiming to build long-term success for themselves and the business. Imagine the situation where during an employee’s time with a company, it could go through a number of owners, each wanting a significant return on their investment and each incentivising the c-suite to deliver that return by giving them a slice of the pie.
Private businesses that I work with, particularly those which have a high proportion of external versus family board tend to have much less inequality across salary bandings.
More-so than any of this, we need to look at what we (as investors and business owners) value as important. Are we looking for rock-star c-suite teams to inflate and exit for their investors? Or are we looking for custodians to build multi-generation or large international businesses that can withstand the test of time?