Chief executives at 18 FTSE 100 listed companies furloughing thousands of staff raked in over £300million, or over £3million each, in pay and rewards since 2015, new findings from the High Pay Centre claim.
There are mounting calls for super-rich fat cat executives to play a bigger part in shouldering the financial burden stemming from the crisis, which will end up hitting taxpayers hard in the pocket.
The Government’s Job Retention Scheme looks set to cost British taxpayers over £40billion in just the first four months of its existence, while some experts think the economy could shrink over a third this quarter.
‘It is highly questionable whether companies in receipt of public money should continue to disproportionately channel private gains to a small number of often very rich people, in the form of very high chief executive pay and dividend payments’, the High Pay Centre said.
Responses: FTSE 100 and 250 companies’ responses to the Covid-19 pandemic
It added: ‘It is right to question the resilience of companies that have lavished billions on shareholders and executives in recent years, but now depend on public funding to cover their costs throughout what will hopefully be a brief pause in economic life.’
As well as furloughing staff, companies can also apply for a loan via the Government’s Corporate Finance Facility, and like some airlines including billionaire Richard Branson’s Virgin Atlantic, plead for a taxpayer-backed bailout. Virgin Atlantic is reportedly now racing to win over new private investments to stay afloat.
To date, around 18 per cent of companies listed on the FTSE 100 index have used the Government’s Job Retention Scheme to furlough staff, according to the High Pay Centre. For the FTSE 250 index, the figure is 26 per cent.
But, this figure could be higher as some companies would not reveal to the High Pay Centre whether they planned to furlough staff or not.
According to the High Pay Centre, in the last five years, the chief executives at FTSE 100 companies which have confirmed they have furloughed staff received over £320million in pay and rewards, amounting to over £3million each a year.
So far, companies on the FTSE 100 index which have furloughed staff include the likes of Primark owner Associated British Foods, easyJet and Melrose Industries, the owner of aerospace group GKN.
Closed: Primark owner Associated British Foods has furloughed over 30,000 people
Grounded: Budget airline easyJet has furloughed 7,500 people in its workforce
Costly: The Job Retention Scheme looks set to cost taxpayers at least £40billion
Primark-owner AB Foods has furloughed around 30,000 staff, while embattled easyJet has furloughed 7,500 people, but still dished out a £174million dividend last month.
Some companies who have furloughed staff have also cut pay for their top executives.
The Government’s Job Retention Scheme, which is designed to ensure people keep their jobs, means taxpayer money is being used to pay up to £2,500 a month for staff furloughed by their employers.
The FTSE 100 companies known to have furloughed staff have dished out £26billion in dividends and raked in £42billion worth of profits since 2015, the High Pay Centre’s research revealed.
Meanwhile, the FTSE 250 companies who told the High Pay Centre they had furloughed staff have forked out around £1.9million a year to their chief executives, doled out £14billion worth of dividends and generated £18billion worth of profits.
So far, around 435,000 companies have applied to use the Job Retention Scheme, with over 3.2million workers affected.
Fat cat pay cuts
Up to 22 April, around 37 per cent of chief executives at FTSE 100 listed companies had had their pay cut as a result of the pandemic, according to the High Pay Centre.
For FTSE 250 listed firms, this percentage is lower, at around 31 per cent.
AB Foods boss George Weston will get a temporary 50% pay cut
When chief executives are taking a pay cut in response to the pandemic, the reduction is generally between a third and a fifth. But it is not always clear whether this is an annual base salary reduction or on a pro-rata basis for the duration of the lockdown.
The High Pay Centre thinks that out of all the companies on the FTSE 100 and FTSE 250 indices, only 13 per cent have scraped or reduced bonuses or lucrative long-term incentive plan payments, which are often based on performance metrics and can amount to huge sums.
Plus, when bonuses have been scrapped, they often only relate to cash bonuses, meaning bonuses in the form of shares could still be in the pipelines.
The inclusion of bonus cuts could have a marked difference on whether of not a fat cat’s pay reduction offers any ‘meaningful demonstration of solidarity’ with their staff, the High Pay Centre said.
Taking an example, a chief executive on an annual base salary of £850,000 and an annual bonus of £1.4million, which is fairly standard for bosses on the FTSE 100, a 20 per cent salary cut lasting three months would represent a loss to the boss of around £42,500.
But, if the same chief executive had their annual base salary reduced by 30 per cent and their annual bonus scrapped, this would amount of a pay reduction of £1.65million. Apply these reductions to all top brass at major companies, and the impact would be substantial.
‘Temporary salary cuts do not represent a particularly generous sacrifice in the context of median FTSE 100 CEO annual pay of £3.5million’, the High Pay Centre said.
To date, 33 per cent of companies listed on the FTSE 100 index have withdrawn proposed dividend payments to shareholders or opted not to offer them as a result of the pandemic.
Within the FTSE 250 index, around 47 per cent of firms have altered their dividend plans.
Across all indices these percentages look set to rise as more companies announce their annual results in the next few weeks.
No divi here: Banks like Lloyds Banking Group have scrapped dividends for investors
Banks were among the first to take action on the dividend front. Barclays, the Royal Bank of Scotland, HSBC and Lloyds Banking Group have all suspended dividend payments this year as a result of the crisis.
The banks took the decision after a request from the Bank of England’s Prudential Regulation Authority, who has also called on top brass to take a pay cut.
According to The High Pay Centre, decisions to withdraw or withhold dividend payments ‘should be welcomed’ in this period of uncertainty.
But, on the other side of the coin, the mass dividend dry-up has left thousands of investors with a small number of shares in big-name brands without a vital source of income for the year ahead.
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