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Why CEOs make so much money

It seems like the salaries of big-time CEOs just keep getting bigger. But why do they make so much, and has it always been this way?

Source | | Peter Yeung

At around 1730 on Wednesday 6 January, about 34 office working hours into 2021, bosses of top British companies had earned the same amount that an average worker in the UK earns in an entire year.

According to research from the High Pay Centre, an independent think tank based in London, FTSE 100 chief executives earn a median of £3.6m ($4.9m) a year – more than 100 times the £31,461 earned by full-time employees. At the top of the pile of those CEOs is Tim Steiner, chief executive of the online supermarket Ocado, who was paid £58.7m in 2019. That’s 2,605 times the company’s staff on average. In one day, he earned seven times their annual salary.

Across the Atlantic, the picture is even more extreme. Analysis by the Economic Policy Institute, a Washington DC-based think tank, showed chief executives of the 350 largest US companies earned an average $21.3m (£16.9m) in 2019. This puts the CEO-to-worker pay ratio at 320 to 1 – more than five times the level in 1989.

These findings come as the coronavirus pandemic has worsened inequality across the world, exposing low-income populations to greater health risks, job losses and declines in wellbeing. These divides have come into sharper focus than ever as awareness grows of the value of ‘essential’ workers – who often have few employment rights and little pay.

The result is mounting confusion and anger over the extraordinarily high salaries that top bosses continue to earn. With these deep-set inequalities laid bare, the question for many is how these huge pay packets ever came about. By whom and how they are given the green light and, crucially, should they continue to have a place in post-pandemic society?

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