Executive pay rises should not outstrip staff salary bumps, Aviva warns
Aviva Investors has warned company directors that it would be “inappropriate” to award themselves bumper pay rises and urged them to recognise that record high inflation puts far greater pressure on the budgets of their frontline staff.
In a letter to the 1,600 firms in which it has stakes, including many in London, the fund management arm of the FTSE 100 insurance company said directors should not expect to receive increases higher than the average employee.
In the letter, reported on by The Sunday Times, CEO Mark Versey wrote “it would be inappropriate for highly paid executives to be fully insulated from the impacts of inflation. We expect any increases to executive base salaries to be below the average for the wider workforce.”
He said executive pay was a “barometer of corporate culture”, arguing companies “must engage with trade unions in good faith and seek a balanced outcome, recognising the impact of high inflation on real wages and the… toll the pandemic has had on frontline workers.”
The letter was sent ahead of companies voting on executive pay at their annual general meetings.
Executive pay rebounded last year having fallen during the pandemic.
According to figures from the High Pay Centre collected during AGM season, the ratio between the pay collected by bosses and employees at 69 FTSE 350 companies fell to 34:1 in 2021, before hitting 63:1 in 2022.
At FTSE 100 companies specifically, PwC analysis showed CEO pay climbing, with 56 per cent of executives receiving a percentage salary increase in line with the workforce level.
Real wages, however, slumped during 2022 as inflation rocketed. The three per cent fall in real wages during 2022 was the sharpest since 1977.
The letter is not the first from Aviva demanding action on a pressing social issue. In January last year, Versey sent a letter warning directors that it would take action if companies did not meet expectations on sustainability improvements.