The Chief Executive of the London Stock Exchange (LSE) has called for an increase in pay for UK company bosses to match the pay packages offered to their counterparts in the US.
Julia Hoggett says British companies struggle to attract and retain top-level executives due to their comparatively smaller pay packages.
However, the High Pay Centre, a thinktank that monitors CEO pay, said her comments were “deluded.”
Union leaders and some politicians also believe that increasing executive pay exacerbates income inequality, especially during a time of economic hardship for workers.
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Hoggett’s comments came shortly after the UK Financial Conduct Authority announced a sweeping relaxation of rules governing the listing of companies on British stock exchanges.
The move could potentially benefit the LSE if it attracts more companies to London.
Hoggett welcomed the changes but criticized the lack of attention paid to executive pay in the new regulations.
She wrote companies are too often hampered by asset managers who vote against executive pay policies, even when those pay levels are significantly below global benchmarks.
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She said: “Often the same proxy agencies and asset managers that oppose compensation levels in the UK support much higher compensation packages in different jurisdictions, notably in the US.
“This lack of a level playing field for UK companies is often not discussed, or if it is, the downside risks to our companies, our economy and our competitiveness are not part of the conversation.”
Luke Hildyard, the director of the High Pay Centre, said: “Typical pay for an FTSE 100 chief executive last year was £3.4m, which sounds like enough money to attract and retain the ‘domestic and international talent’ described in the article.
“The UK is already one of the most unequal countries in Europe, with getting on for a fifth of total incomes in the country hoovered up by the richest one percent, according to some estimates.
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“The idea that paying millionaire executives, even more, is any kind of solution to stagnating living standards across the country seems a bit deluded.”
However, matching US pay levels would provide a significant step up for most UK executives.
In 2021, the average compensation package for chief executives of S&P 500 companies was $18.3m (£14.6m), according to data from the American Federation of Labor and Congress of Industrial Organizations.
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Union leaders have suggested that the UK government should introduce a maximum ratio for chief executive pay compared with average workers and mandate workers on boards.
Paul Nowak, the TUC’s general secretary, has cited the rapid growth in executive pay and financial services bonuses at energy companies, which he believes exacerbates income inequality.
He argues that without urgent action, the cost-of-living crisis will deepen inequality in the UK further, and it’s time to hold down pay at the top, not wages for everyone else.
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Hoggett’s call for UK company bosses to receive higher pay packages to match their US counterparts has been met with criticism from union leaders and some politicians who believe that increasing executive pay would exacerbate income inequality.
Hoggett argues that the UK’s lack of a level playing field for companies is often not discussed, and the downside risks to the UK’s economy and competitiveness are not part of the conversation.
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