At the risk of defending the "Fat Cats" of corporate Britain, new research from market analysts Plimsoll shows that rising executive pay is broadly in line with the results they are delivering. Increased sales and significantly better profit margins mean there is a “job well done” acceptance among many shareholders that they are worth every penny.
Plimsoll has examined the overall health and performance of the UK’s 1000 largest, most important companies. Senior analyst David Pattison explains, “The fact that share prices haven’t risen at the same rate is often used as a means to argue that executive pay deals are grossly excessive. However, the rate of growth and, more importantly, the profitability of these companies tell a different, more impressive story. Many of these boardrooms have built fantastically strong companies”.
However, a backlash could be looming unless the growing gap between executive rewards and the rest of the workforce is addressed. While executive pay at the UK’s top 1000 companies has risen by more than 44% in the past 8 years, the rate of increase enjoyed by the rest of the workforce has been just 23%. With a recent study suggesting 6 out of 10 employees feel excessive boardroom pay deals are the biggest source of demotivation, how long can boards continue to enjoy the goodwill of their most important resource – their people?
Pattison says, “It’s clear that the spoils of recent success have not been enjoyed equally at the UK’s largest companies. The facts speak for themselves – directors’ remuneration and sales growth are growing at almost twice the rate of the rest of staff”.
“However, as the economy continues to recover and the much publicised skills shortage continues to bite, executives could find the phenomenal growth in their rewards tempered slightly as skilled employees demand a fairer slice of the pie. In 2016 and beyond, shareholders might need to concentrate on keeping the troops happy rather than just the generals”.