How much should a corporate boss be paid? What is fair? 

Executive pay has been in the news on and off for a while. We have loads of examples of pay that seemed completely out of touch with ordinary people’s lives. And often also utterly out of sync with how the business was performing.  Think Philip Green at BHS. Think Carillion. The financial crisis in 2007-08 highlighted how financial institutions had removed themselves completely from reality, living in a weird bubble where extreme bonuses seemed ok, even when the foundations were crumbling. Think city bankers and Fred Goodwin… 

While the crisis sharpened the minds somewhat, the difference between the lowest paid and highest earners is still huge. Today, Chief Executives typically see their pay rise around six times as fast as the pay of their workers. A report this week from The High Pay Centre reveals this. In addition, top bosses on average get paid 145 times more than the average pay of their workers*). Or, when comparing the average pay of a FTSE 100 CEO and the lowest paid person in the business, the ratio is 1:265**).  

Imagine what it feels like to know that the top boss gets 265 times your salary. Yes, they often do more complicated work, and the responsibility of the entire business is on their shoulders. But 265 times more important work?? Surely not… And executive bosses typically see their pay rise six times as fast as the pay of others in the companies. In the energy industry, the ratio of highest to lowest earner is 93:1. Fair? Well, not really… 

On Wednesday, Sacha Romanovitch from the Accountancy firm Grant Thornton was interviewed on BBC Radio 4, talking about the ratio cap of 1:20 which they have introduced (this is in comparison to the average salary rather than the lowest paid). She has also instigated a profit-sharing scheme for employees (similar to the John Lewis Partnership scheme). It is great to see a leader in the Finance sector – often perceived as the most greedy of all – take such as step. 

At People’s Energy, we believe in fairness, equity and mutual respect. Huge pay differences, in our view, do not display respect for those doing less well-paid jobs. All of our colleagues do an amazing job, seeking to support our customers, make things work, and provide a friendly and warm service. Without everyone in the team, we wouldn’t be the company we are. This is why we have introduced a ratio cap of 1:10 between the highest and lowest salary in the company (and it is also why we are a Living Wage company). Our current ratio is 1: 5.5.  

In addition, a core foundation for our company is profit sharing. We will share 75% of the profits with employees and also customers, and from 2025 that will be 100%. Finally, both customers and employees have a democratically elected representative on our Board. They will have a say on the executive pay in the company.  

If we are serious about wanting to be ‘an energy company by the people, for the people’, nothing less would be enough.  

 

Notes:

*) Report published on 15 August 2018, on executive pay, by The High Pay Centre http://highpaycentre.org/pubs/high-pay-centre-cipd-executive-pay-survey-2018

**) https://www.equalitytrust.org.uk/national-shame-ftse100-ceos-earn-265-times-more-minimum-wage-worker