Fat Cat Friday – CEO Pay Is What Business Of Yours Matey?

Today’s Fat Cat Friday – the day of the year by which FTSE CEOs have already made the amount the average worker will have to strive all year for. This might even be true but what business is it of your’s matey?

For what other people pay other people isn’t in fact your business, is it? Sure, what you pay someone is very much your business. You do, I do, we all do, keep an eye on what we’re paying the servants after all. £50 a year and an old suit at Christmas for their Sunday best is quite enough. What we get paid is also of intense personal interest, it’s difficult to see how we could get by on less than that £200,000 a year from the trust fund.

But what other people are paying, from their own money, to other people? Nowt to do with thee nor me now, is it?

The bosses of the UK’s biggest companies are facing renewed scrutiny over excessive pay deals, after new figures showed top executives earned the average worker’s annual salary within the first three working days of 2019. Dubbed “Fat Cat Friday”, 4 January is the date by which the average CEO of a FTSE 100 company pockets the equivalent take-home pay of a typical full-time worker in the UK. Calculations by the High Pay Centre thinktank and the professional HR body the Chartered Institute of Personnel and Development (CIPD) show top executives are earning 133 times more than the average worker, at a rate of around £1,020 per hour or £3.9m annually. That’s up 11% compared to a year earlier.

Bully for them. The money being paid to the Fat Cats belongs, before that pay, to the shareholders. And if they want to spend it upon the managers they’ve hired to increase their fortunes then that’s up to them. No, we can’t make the usual complaint, that dispersed shareholder ownership means the managers are ripping all off by hoodwinking everyone. Private equity doesn’t suffer from that dispersed interest and private equity pays its managers more than publicly listed companies.

But there’s more to this:

The GMB’s general secretary, Tim Roache, said: “It’s sickening. Three days into the year and fat cat bosses have already made what average workers will earn all year. “It’s not fair, and it makes no sense in how we value people’s contribution to society and it makes no sense for the economy – I don’t know any care workers who squirrel their wages away in offshore accounts, they spend it in their local areas and on paying their bills.”

This will probably come as a surprise to someone as worldy wise as a union boss but we’re talking here about the FTSE100 bosses. And they’re very little to do with the UK economy. FTSE isn’t a listing of the largest UK companies, it’s a collection of the largest companies listed in the UK. Some of which do no business at all in the UK – Antofagasta being an example. It’s a bunch of copper mines in Chile. Randgold is gold mines in Africa and they’re not even registered as a British company.

But more than this. Some 75% of the revenues of FTSE100 companies aren’t even in sterling, let alone originate in the UK. We’re simply not talking about anything connected in any major manner to the UK economy. Thus comparing anything to wages in the UK economy is fatuous. Even better, the majority of the FTSE100 is owned by foreigners.

So, Fat Cat Friday. It’s about what foreigners are paying people to run businesses in foreign. What’s this got to do with the UK economy, UK wages, or even what business is it of yours matey?

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Pat
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Pat

The bosses of Britain’s biggest businesses are compared to average workers
Should either be the average boss compared to the average worker, or the top boss with the top worker- say a premiership footballer.

Matt Ryan
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Matt Ryan

Get the argument that the top X in any field will take a lot of money home (FTSE100 CEOs, Premier League footballers, F1 drivers etc). Where I think we do have some issues is the closed nature of the C level exec pool. While Tim mentions shareholders, be interested to know whether institutional investors (people holding the shares we have in our pensions) distort the market by paying over the odds. Either because the don’t care (it’s not their money) or for quid pro quo – they get a nice position if they give one to their mates (old school,… Read more »

timworstall
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timworstall

Private equity doesn’t suffer from those same principal/agent problems. Private equity tends to pay the C Suite more. That would seem to answer the point….

Matt Ryan
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Matt Ryan

Is it related to performance then? Private equity is results/profit driven so perhaps the C suite doesn’t last as long there if they don’t perform. Easy also to compare the talent in football and F1 – do we have an under-achieving/over-compensated problem in the FTSE listed companies? I used to work at Telewest with Gavin Patterson and he was the usual middle-of-the-road dull-as-ditchwater uninspiring sort who seem to pollute many of senior management positions in British companies. Other than looks (maybe chrisma) what did he do for BT? Will he emerge somewhere else to ply his limited abilities? Seemed to… Read more »