It is time for corporate leaders to realize that big pay awards must end

In past times, many people complained about the lack of high-ranking leadership. The gap between what was needed and what is available cannot have been wider than it is now. We are now closer to a third-world war than ever. The pandemic and its aftermath are still with us. To top it all, a large portion of the west is currently experiencing a cost of living crisis as well as being encouraged to wear hair shirts to combat climate change. We’ve seen politicians and central bankers seem almost helpless to stem this tide. Voters seem to have given up on politicians and central bankers. This is the right time for business leaders, who can use their creativity, innovation, and ability to get to the core of the matter to save the day.

This is unfortunately not true. Despite all the talk about “stakeholder capitalism”, “corporate social responsibility” or the like, it seems that nothing concrete is happening. The chasm between super-rich people and everyone else is becoming ever more difficult. It is important to note that the executives of the largest companies in the world continue to receive huge amounts of money.

Research has just been published and shows that the gap between bosses’ and employees’ pay will continue to widen this year, despite narrowing briefly during pandemic. According to the High Pay Centre (a think tank advocating for fairer pay structures), chief executives of the 350 largest quoted companies in the U.K. will be paid 63 times the median salary of their employees. After the widespread reductions in executive pay, the ratio between bosses’ and workers’ pay had dropped to 34:1 by 2021. However, many businesses have cut costs to respond to the pandemic. They also continue to reduce overheads like office space. Sometimes this is done in the name to transform themselves into remote workers. This has resulted in a rise in executive earnings and bumper profits.

Recent weeks saw a number of high-profile protests by investors and others against excessively generous pay awards. Only 31% of shareholders voted for the pay program for Jamie Dimon, chief executive at JPMorgan Chase, while a 50% raise for the chief executive of Next was criticized by the Church of England’s Pension Board. The size of senior executive pay packages has been criticized by companies that are not associated with “ordinary people”, such a supermarket chain Tesco or a bakery chain Greggs. As similar awards are expected to continue during the annual meeting season, the Financial Times’s influential Lex column is urging shareholders not to vote them down.

It shouldn’t have to be this way. In recent years, executives in public companies have been known to throw their weight behind social causes. But when it comes down to something closer to home, where they can make a difference through their actions (rather that just words), they seem to be blind. In the past, company bosses understood that it was not worth becoming unimaginably wealthy if their employees couldn’t afford to buy the products or provide shelter and food for their families. Today’s counterparts should follow their example and be enlightened in self-interest. Rana Foroohar (FT columnist) has written that “if the wealthy don’t give a little more today, they might have to give a lot tomorrow.”

While citizens around the globe are unhappy with their politicians, their disapproval is largely resigned shrugging. Due to growing awareness of the influence and reach of big tech, oil and gas majors, and leading financial institutions, business leaders may not be able to get away with it.

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