Forcing companies to publish the pay ratio between chief executives and their UK workers is unlikely to reduce pay inequality and may actually lead to firms being unfairly criticised by the public, according to a new study.
A survey conducted by ICSA: The Governance Institute - in collaboration with recruitment specialist The Core Partnership - found that 55 per cent of company secretaries polled feel that the obligation to report on pay will not reduce inequality.
Only 13 per cent said that they feel it will help and 32 per cent said that they were undecided. When asked if the published pay ratios would be used to unfairly criticise companies, 61 per cent said that they thought it would, 22 per cent said that they thought it wouldn’t, and 17 per cent said that they didn’t know.
“A comparison between CEO and average worker pay is meaningless without a good understanding of the demography of a company,” said Simon Osborne, chief executive at ICSA.
“A large multinational retailer with a high number of unskilled workers is likely to have a higher ratio than a relatively small professional services company with a large number of highly skilled professional employees,” he explained.
“A ratio that does not recognise the difference in skills employed by different companies will be like comparing apples with oranges.”
The study found that many respondents are worried that pay ratios will be misconstrued and that figures will be used by the media “to generate sensationalist headlines”.
Some respondents said that they were concerned the ratio would drive outsourcing of low-paid or low-skilled roles. That would reduce perceived inequality but also allow companies to “divorce” themselves from responsibilities for those who provide these roles on their behalf, ICSA said.
