18th December 2015
The increasing pay gap between bosses and employees is demotivating workers.
A report from the Chartered Institute of Personnel and Development (CIPD) said executive pay growth had reached a ‘crisis point’ and there was no longer a link between pay and performance.
Of 1,000 workers surveyed, just under 60% said they were demotivated by the gap in pay between them and the people running the business.
Two-thirds of workers said their boss was not rewarded in line with the organisation’s performance and the CIPD has said new measure should be brought in to help executives understand the impact of leadership of employee wellbeing.
Charles Cotton of the CIPD said: ‘It’s crucial that chief executive reward packages are simpler and more clearly aligned to both financial and non-financial performance measures.’
The Institute of Directors, a lobby group for business leaders, said those at the top of the company structure should face pressure when ‘multi-million pound pay deals bear no resemblance to a company’s performance over the long-term’.
Although changes have already been made on director remuneration, employees are disenfranchised by the seemingly never-ending pay increases at the top.
Oliver Parry of the IoD said: ‘Shareholders now have a binding vote on executive pay, companies have to publish a single figure from how much directors earn.’
He added that institutional investors were also pushing back against large pay packets.
However, Parry said that ‘employees fear bosses are just writing zeroes on their pay cheque which is then approved without scrutiny’ and that workers should be allowed to observe how remuneration committees work.