Brexit-inspired equity gains will pour "petrol on the fire" of the issue of executive pay, said Steve Varley, chairman and managing parter for the U. and Ireland at professional services company Ernst & Young.Varley is a business adviser to Britain’s Chancellor of the Exchequer Philip Hammond.Calls to toughen the stance on corporate remuneration have mounted since a government green paper in November showed compensation of FTSE 100 bosses more than quadrupled in the past 18 years even as wage growth of most workers lagged behind.CEOs earned, on average, 128 times more than full-time employees in 2015, up from 47.1 in 1998, the report showed. pay increases will drop to 2.2 per cent for 2017, according to an annual survey published by the Bank of England, a figure that won’t keep up with inflation. Davidoff cigarette maker Imperial Brands Plc dropped plans in January to give its CEO a raise of as much as £3m through a change to its incentive plan, heading off a showdown with shareholders at an annual general meeting.Brexit is about to make CEOs of some of Britain’s biggest public companies a whole lot richer.That may sound counter-intuitive since evidence is mounting on how the plan to quit the European Union is hurting businesses.
The measure is one of a set of proposals being considered by the Government in an effort to clean up corporate Britain, in a Green Paper to be published on Wednesday.
But pay packages of many FTSE 100 chief executive officers are partly tied to how well share prices are doing rather than the CEO’s performance -- and some stocks are soaring.
British equities got a boost since the June vote because the likes of Rio Tinto, Smiths Group and WPP generate most sales abroad and earn a fortune when they convert these revenues back into the weakened pound.
He added that “executive pay has grown much faster over the past two decades than pay generally and at times is not in line with corporate performance.” The average chief executive of a FTSE 100 firm is now paid close to £5m, more than 170 times the average worker, according to the High Pay Centre.
The Institute for Fiscal Studies think tank warned last week that workers in Britain face the longest squeeze on their earnings for 70 years.