Only around a third of FTSE 100 firms have announced cuts to executive pay in response to the Covid-19 crisis – and most of the measures are “superficial or short term” in nature, according to new research.

In their joint report FTSE 100 CEO Pay in 2019 and During the Pandemic, CIPD and the High Pay Centre reveal that 36 elite firms have used a combination of methods to tighten salaries, with 14 opting to target pay cuts at their top-earning 20%.

Meanwhile, 11 companies have cancelled short-term incentive plans (STIPs) for their CEOs and two have deferred CEO pay rises.

None of the 36 have chosen to reduce their CEOs’ long-term incentive plans (LTIPs) – deals that typically make up half a CEO’s total pay package. In 2019, LTIPs in the FTSE 100 paid out a total of £238.2 million across 81 firms.

In addition, performance-related pay deals continued to pay out “as a matter of course”, with policies at 88 FTSE 100 firms rewarding CEOs with a total £108.5m last year. (CIPD and the High Pay Centre, 5 August 2020)

Looking at the steps that the 36 FTSE 100 firms have taken to rein in CEO pay since the dawn of the current crisis, CIPD chief executive Peter Cheese said: “It doesn’t look like the pandemic has proven to be an inflection point for executive pay yet. The bulk of cuts made so far appear to be short term and don’t signify meaningful, long-term change.  Pay among the FTSE 100 will probably fall next year, but this is more likely to be due to wider economic circumstances, rather than a fundamental change in approach to executive pay.”

Now more than ever, Cheese noted, remuneration committees ”should be looking at wider workforce issues and organisational cultures to help them determine CEO pay.”

High Pay Centre director Luke Hildyard added: “Very high CEO pay undermines the spirit of solidarity that many companies are trying to project as they battle against the impact of the coronavirus. More pragmatically, multi-million pound pay awards worth over a hundred times the salary of a typical worker seems like an unnecessary extravagance during a period of such economic uncertainty.” (CIPD Press Office, 5 August 2020)

Should the pandemic provide the necessary inflection point for taming CEO salaries?

The Institute of Leadership & Management’s head of research, policy and standards Kate Cooper says: “This report is certainly disappointing – and I agree with Peter Cheese that the motivation from the can-do culture that has thrived during the crisis hasn’t translated into a desire for a more democratic approach to setting CEO pay.

“What really strikes me about the organisational experience of this pandemic is that for the lowest-paid members of staff, working from home would have been a far more disruptive proposition than it would have been for senior executives, who are more likely to have their own, personal office spaces and high-spec equipment.”

She notes: “These findings remind me of a recent story on LinkedIn about a young woman who was out of work as a result of the pandemic, but fielding job offers. One organisation she’d applied to was keen to hire her, but told her recruitment agency to offer her a salary 25% less than what she wanted. However, she fortunately landed another offer where the firm was happy to pay what everyone involved felt the job was worth.

“What this demonstrates is that just as we had situations at the beginning of lockdown where firms were claiming furlough relief while still expecting employees to work – or were simply laying workers off straight away – we’re going to see a real mix of moralities as the crisis continues, in terms of how organisations treat their staff.”

Cooper adds: “For me, it always comes back to that crucial ratio of how many times more money a CEO receives than their lowest paid member of staff. During this pandemic, has the CEO of ‘Organisation X’ really added hundreds of times more value than their junior workers to the process of keeping the ship afloat? Or is it their customer- and supplier-facing staff who have been most directly responsible for keeping the business in business?

“I would suggest that those in the latter camp have added significant value.”


For further insights on the themes raised in this blog, check out the Institute’s resources on ethics


Source refs:


CIPD and the High Pay Centre, 5 August 2020


CIPD Press Office, 5 August 2020