Fat cat bosses earn more by second working day of Jan than average UK worker does in whole year

Controversy abounded when High Pay Centre reported on the vast pay inequality on the day dubbed ‘Fat Cat Wednesday’. Referring to the first Wednesday in the first week of January this day represents the time when top business executives will have earned more than the average UK worker earns in one year.

The information came from think tank High Pay Centre, whose focus is to uncover and address pay inequalities throughout the UK. High Pay Centre director Deborah Hargreaves claimed the results were to have highlighted “how insensitive big company executives have become”, continuing:

“When top bosses take home more in two-and-a-half days than the average worker earns in a year, there is clearly something wrong with the way pay is set for both bosses and workers.”

But is that taking in to account the reality of global economics and of the task that they are responsible for? The truth of the situation is that British-based businesses are competing with other global corporations, and that includes competition over a skilled executive talent pool. If pay was capped, or if the structure of pay within corporations was modified in order to produce a fairer economic society, then many would simply up and leave to regions where no such limits would apply. This would mean serious business talent leaving the UK to head to other parts of Europe, parts of Asia or the US.

Our economy relies on the profit of business based here; if we undermine that then we undermine our financial prospects and hinder our road to recovery. As much as people may not be comfortable with the fact of such huge pay inequalities the truth is these top executives do actually contribute to the overall fiscal success of the UK. They do have an extremely large task at hand – overseeing tens of thousands of staff while ensuring the business stays profitable.

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Where such unequal pay makes less sense is when a company is not actually profitable, and it is the case currently that executives at the helm of such businesses are still in receipt of vast pay and bonuses. In this instance I can better understand where people may take umbrage at huge discrepancies in pay. I believe that one way to improve the existing pay system is to introduce performance-related pay, a view mirrored by CBI Chief Policy Director, Katja Hall who says:

“High pay should always be associated with high performance.

Hall is also quick to point out that while those in the lower echelons of corporate hierarchies may have seen static pay or even pay reductions, the likelier businesses are given a chance to operate profitably, they too will start to see dividends:

“Employers recognise that staff have seen a real squeeze in earnings which was the trade-off that enabled more people to keep their jobs during the recession. The good news is that as growth picks up, so too will pay settlements.”

Ultimately we need to strike a balance between what is deemed to be a fair society and what is required for business on a practical level, but we can’t do that at the expense of strong leadership within profitable business as this lays the foundation for an economically successful UK, the weakening of which would have a negative impact for all.

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