Whichever way you cut it the headlines from the High Pay Centre’s most recent report on the pay of Chief Executive Officers don’t read well… FTSE 100 CEOs get half a million pound pay rise… FTSE 100 CEO pay increased 16% in 2022… The median FTSE 100 CEO pay is 118 times the median earnings of a UK full-time worker.

As with all headlines, however, the devil lies in the detail and this therefore warrants some exploration before we conclude that the leaders of the UK’s largest listed companies are all undeserving Fat Cats paid far beyond their true worth.

Here are a few points from within the report which provide context if not justification for the median £3.91 million FTSE 100 CEO’s banked last year:
• Of the total FTSE 100 companies, 38 companies actually reduced the pay of their CEO in 2022
• The total median pay figure for 2022 was lower than it was in 2017, 2015 and even 2013
• The multiple for FTSE 100 CEOs compared to the median UK full-time worker of 118 times may be high, but still below the 123 times reached in 2018
• Only 21% of the total pay is base salary, with the rest being a combination of bonuses, incentive schemes, pensions and benefits
• 40% of total pay is derived from long-term incentive payments, the structure of which may predate the cost-of-living crisis
• From an international perspective, FTSE 100 CEOs receive substantially less than their S&P 500 counterparts in the US who banked £12 million ($14.8 million) last year.

There are also a number of arguments in support of this level of compensation. These focus on the international nature of the market for talent, the potential for many of these CEOs to earn more working for private companies, and the fact that these companies employ millions of people and generate billions in profits.

Some might also argue that company CEOs are pretty good value when, for example, Kansas City Chiefs quarterback, Patrick Mahomes, is taking home $45 million a year for 10 years.

For me though, all of the above simply suggests we’ve stopped seeing the wood for the trees. As with investment performance, the choice of benchmark is as important as the performance itself.

The multiples compared to the median worker are the figures that leave me feeling least comfortable. The question I would like to ask each of these CEOs is: “What makes you worth over a hundred times more than your average employee?”

Although it’s impossible to prove, I suspect that if the CEOs of many of these companies were to leave unexpectedly tomorrow, the share prices of their employers would not fall dramatically. Some might even go up!

I think individual and institutional investors alike should continue to exert pressure on Boards to impose restraint when it comes to executive pay, particularly in tough times. Those fearful their CEOs will vote with their feet if they’re unhappy with their compensation should call their bluff: this isn’t professional sport.