The chief executive of the London Stock Exchange has called for the bosses of UK companies to be paid more in order to match their counterparts in the US.
Julia Hoggett argued that British companies were finding it difficult to attract and retain executives because they offered smaller pay packages than rivals in the US.
The comments, in an article published on the LSE’s website on Wednesday, were criticised as “a bit deluded” by the High Pay Centre, a thinktank that tracks chief executives’ pay, while the head of the Trades Union Congress (TUC) said UK chief executive pay should go down, not up.
Hoggett’s remarks came hours after the UK financial regulator, the Financial Conduct Authority, announced a sweeping relaxation of rules on listing companies on British stock exchanges. Hoggett welcomed the changes, which could benefit the LSE if they attract more companies to London.
The FCA acknowledged that the shake-up would mean UK investors would face more risks because there would be fewer checks. However, Hoggett argued the changes left out the “critical element” of executive pay.
Companies are too often “hampered” by asset managers voting “against executive pay policies even when those pay levels are significantly below global benchmarks”, she wrote.
“Often the same proxy agencies and asset managers that oppose compensation levels in the UK support much higher compensation packages in different jurisdictions, notably in the US.
“This lack of a level playing field for UK companies is often not discussed, or if it is, the downside risks to our companies, our economy and our competitiveness are not part of the conversation.”
Union leaders and some politicians have suggested that rising executive pay fuels the perception of inequality, particularly among UK workers who have endured a real pay stagnation the likes of which has not been seen for decades at time of a cost of living crisis.
Paul Nowak, the TUC’s general secretary, said the UK government should “clamp down” on high executive pay by introducing a maximum ratio for chief executive pay compared with average workers and mandating workers on boards.
He cited rapid growth in financial services bonuses and executive pay at energy companies in particular.
“Chief executive pay is booming – but working people are enduring the longest wage squeeze in 200 years,” he said.
“It’s a tale of two Britains. Without urgent action, the cost of living crisis will deepen inequality in this country even further. It’s time to hold down pay at the top – not wages for everyone else.”
Luke Hildyard, the director of the High Pay Centre, said: “Typical pay for a FTSE 100 chief executive last year was £3.4m, which sounds like enough money to attract and retain the ‘domestic and international talent’ described in the article.
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“The UK is already one of the most unequal countries in Europe, with getting on for a fifth of total incomes in the country hoovered up by the richest 1%, according to some estimates.
“The idea that paying millionaire executives even more is any kind of solution to stagnating living standards across the country seems a bit deluded.”
The rewards for British chief executives have soared relative to the rest of the population, with the ratio of bosses’ pay to workers’ growing particularly in the two decades before the global financial crisis in 2008.
However, matching US pay levels would still provide a significant step up for most UK executives. In 2021, chief executives of S&P 500 companies received, on average, $18.3m (£14.6m) in total compensation, according to data from the American Federation of Labor and Congress of Industrial Organizations.
For that year, the High Pay Centre’s figures showed that FTSE 100 chief executives received £3.4m. The average total pay for a UK worker is about £33,000, according to the Office for National Statistics.
David Schwimmer, the chief executive of the London Stock Exchange Group, which owns the LSE, was paid £4.7m in 2022, down from £6.8m the year before. He was paid 40 times more than the median worker at the company, according to its last annual report.
London Stock Exchange plc, the company that Hoggett has led since April 2021, reported that its highest-paid director for 2021 received £1.3m. The company said it was unable to share details of executives’ pay below the parent company’s board level.
