FTSE 100 companies claiming millions of pounds of government support for furloughed workers paid their chief executives an average of £3.6m a year before the coronavirus crisis, according to new analysis that highlights the disparity between workers and their bosses.
The 18 big companies who have so far publicly revealed that they will use the scheme have spent a combined £321m on pay for their chief executives over the last five years, according to the High Pay Centre, a thinktank.
Blue-chip companies that planned to use the scheme included Primark owner Associated British Foods, easyJet, and British Airways owner IAG, as well as retailers Next and JD Sports. All of the companies that have revealed they have furloughed workers have also announced executive pay cuts.
The government has committed to paying the salaries of millions of workers during the coronavirus lockdown to encourage companies to keep employees on even if they are prevented from working. Under the job retention scheme companies will be able to claim back from the government 80% of the salaries of workers who are furloughed, up to £2,500 a month per worker. Some employers have committed to paying the remaining 20% of furloughed workers’ wages.
The scheme has been one of the most important measures to cushion the blow to the economy during lockdown. However, Luke Hildyard, the High Pay Centre’s director, said the recipients of taxpayer-funded support would face pressure to cut high executive salaries, given that the unprecedented government support also directly benefits businesses and their shareholders.
37% of FTSE 100 companies have already cut executive pay in order to reduce costs during the coronavirus lockdown. However, only 13% have cut the bonuses, and long-term incentive payments often comprise the biggest component of executive pay awards, raising concerns that pay cuts will not necessarily result in large reductions.
“The coronavirus job retention scheme is a vital progressive measure to protect people’s jobs and incomes at this critical time, but it’s important to understand that it is a subsidy for businesses, as well as for workers,” said Hildyard.
“The companies that are effectively taking public money to sustain themselves through the shutdown will be under particular pressure to achieve a fairer balance between rewards for executives, investors and their wider workforce in future. But hopefully the sense of solidarity forged in the crisis will raise ambitions for the social and environmental contribution of all businesses.”
The £42bn profits made in the last five years by the 18 companies could have covered the expected cost to the government of the scheme, the High Pay Centre’s analysis suggests. The Office for Budget Responsibility, the government’s economic forecaster, estimates as much as 30% of the workforce will be covered at an estimated cost of £42bn.
During that same period, those companies paid shareholders £26bn in dividends, although dividend payments are also likely to be significantly lower this year. Some 35 FTSE 100 companies have cut, suspended or cancelled their dividends, according to investment platform AJ Bell.