More than 20 leading social scientists have warned Britain’s largest investment firms and pension funds that allowing US-style executive pay packages could “create a significant risk of greater inequality” and “much worse, lower levels of happiness, health and well-being across society.”
The academics said they decided to speak out as a growing number of British business leaders and the London Stock Exchange have called for much higher pay to improve Britain’s competitiveness.
This is despite the fact that bosses at Britain’s 100 largest listed companies will receive an average wage of £4.4 million in 2022 (the latest year available). This figure represents an increase of 16% on the previous year and is 118 times the average UK worker, according to think tank High Pay Center. AstraZeneca’s CEO Pascal Soriot was the best paid, receiving a £17m pay package last year.
The pharmaceutical company, along with HSBC, LSEG – the owner of the London Stock Exchange – and medical device group Smith & Nephew, have revealed, or signaled, that they are looking to increase executive pay to keep up with US rivals.
Julia Hoggett, the chief executive of the London Stock Exchange Group, has said that higher salaries in the US have led to an exodus of British executives and companies crossing the Atlantic.
Executives at US companies in the S&P 500 are paid three times as much as those in Britain – an average of $16.7m (£13.1m), according to the US trade union federation AFL-CIO.
Hoggett previously called for a “constructive discussion” between British investors and advisers to raise wage levels in Britain. “The alternative is that we sit idly by as our biggest exports become skills, talent, tax revenues and the companies that generate them,” she said.
In their letter to the largest investment firms and pension funds, the academics said they were “concerned that neither the business case to justify these claims nor the potential negative social and economic impacts of higher top wages” had been “properly examined or discussed”.
They said: “The desired ‘constructive discussion of the case for the UK’s approach to executive pay’ has so far largely focused on the case for further executive pay increases.” The academics said not enough thought had been given to the risks of higher executive pay.
Risks, they said, included “a strong link between higher levels of inequality and more pronounced socio-economic problems in public health and well-being.
“Published companies include some of the largest employers in Britain and the pay for their senior managers sets the benchmark for high earners in other areas. Increasing top wages at these companies creates a significant risk of greater inequality. This is a potential threat to economic stability, to the happiness and prosperity of the people whose savings provide capital for investment and ultimately for investors in the UK economy.”
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The letter, which was coordinated by the High Pay Center, did not express blanket opposition to higher pay for top executives at all companies, “but instead recommends that investors treat proposals for top salary increases with skepticism before deciding whether to pursue them.” whether or not to support. from case to case”.
Luke Hildyard, the think tank’s director, said: “The debate over pay in Britain must recognize that there is significant evidence and a number of expert voices against very high top pay.
“While not a zero-sum game, excessive executive pay does impact the pay levels of the wider workforce. There is also a well-documented link between higher levels of inequality and much worse lower levels of happiness, health and wellbeing across society.”