Our research showed unacceptable levels of skyrocketing CEO pay. We know there are solutions – so why won't Theresa May take them?

Given perceptions of authority over her party, cabinet and the Brexit process, research showing that pay for FTSE 100 chief executives leapt by 11 per cent last year is unfortunate for Theresa May. Our research – done by the Chartered Institute of Personnel and Development, and the High Pay Centre think tank – was published this week, almost a year after May called excessive executive pay the unacceptable face of capitalism and promised a crackdown.

With median CEO pay touching £4m a year, roughly 167 times the typical UK worker, this supposed crackdown hasn’t exactly had Britain’s lavishly paid captains of industry choking on their boiled swan.

Very high executive pay is one of the reasons why the top 1 per cent of UK earners now capture more than 14 per cent of total incomes, according to the World Inequality Database. This compares to the 6 per cent they took in the late 1970s.

In fairness to May, her government has overseen new regulations requiring companies to report the ‘pay ratio’ between their CEO and those in the top quarter, in the middle and in the bottom quarter of earners across their UK workforce. Once these disclosures start to appear in annual reports – which may not happen until 2020 – they will highlight the scale of pay inequalities and encourage people to question what it is that causes the gap between those at the top and everyone else; what are the consequences of this gap and what measures we might implement to close it.

However, ratios on their own will not be enough to curtail excessive executive pay awards. It is a great shame that the prime minister backed down from one of the boldest of her proposed corporate governance reforms – giving workers a seat on company boards – in the face of opposition from big business. Staff interests are most closely aligned with the long-term success of the companies they work for of any stakeholder constituency. Workers want the company to thrive in the long term in order to safeguard their jobs. They understand what is going on far better than many shareholders who very often hold stakes in thousands of different businesses across the world, and can divest far more easily than a worker can move jobs.

On top pay, workers are likely to take a realistic perspective because they won’t want to see a good CEO who is helping the company to thrive depart. At the same time, an executive who takes all the credit for collective efforts and who requires a full programme of inoculations before setting foot in the same room as their workers probably wouldn’t get their hands on the provocatively huge pay packages that have stoked public opprobrium.

Other measures that could be considered include Labour’s proposal from their last election manifesto to include clauses related to pay ratios in public procurement contracts. This could have a big impact on supposedly private companies such as defence contractors and outsourcing firms whose revenues ultimately come from public money. The strong relationship between income inequality and declining trade union membership suggests that policies to reinvigorate unions would also have a big impact in terms of closing the pay gap.

Any policy programme based on these or similar measures usually attracts cries of being ‘the politics of envy’ or ‘anti-business’. Reducing inequality is misguidedly seen as being about taking down the rich, rather than raising up the poor. In fact, these are two sides of the same coin. Higher living standards are contingent both on economic growth and how that growth is distributed.

The minimum wage, trade union battles over pay and working conditions, and public services funded through progressive taxation, are all examples of developments that have made a considerable difference to people’s lives, by ensuring a more even distribution of resources.

They are also still immensely popular and fondly remembered by the general public. This suggests that the bonus payment in terms of votes is potentially very generous for any politician brave enough to tackle excessive executive pay.

Luke Hildyard is Director of the High Pay Centre