I’d like to a start by wishing you all a very happy and prosperous New Year, for some it has already proved to have been a very fruitful beginning to 2016.
Fat Cat day in 2016 was observed this Tuesday 5 January. The name coined by the High Pay Centre (HPC) marks the day that FTSE 100 Chief Executive Officers (CEO) have accumulated earnings greater than the average full time UK employee. The HPC is an independent think tank focused on pay at the high end of the income scale, they use the day to highlight the growing differences between the super-rich and the rest of the population.
According to the HPC the average FTSE 100 CEO total earnings is a staggering £4.96m. They then assume that the average CEO will work 12 hour days, three weekends out of four and have just ten days holiday per year. This leads us to an hourly rate of £1,260.
The Office of National Statistics recently published their provisional results for 2015 annual earnings, which showed the median annual earnings is £27,645. This means the average CEO must work for just 22 hours to earn the average annual wage in the UK. The assumption that everybody started work this year on the 4 Jan would imply that at some point on Tuesday afternoon the CEO year to date earnings surpassed the entire 2015 earnings of the average UK worker!
The announcement has come under some scrutiny and, in parts, criticism on social media due to the HPC using different calculations for averages, CEO as mean but median for the employee. Well thankfully the ONS also provides the mean average earnings too!
The mean average earnings is £33,689, so it would take just under 27 hours or 2 days and 3 hours for the CEO to be up on the annual UK worker. Fat Cat Tuesday now becomes Fat Cat Wednesday.
Further calculations can be made against the KPMG Guide to Directors Remuneration 2015 where the median CEO earns a paltry £3.92m… Fat Cat Day would fall on Wednesday in this case for both mean and median UK worker earnings.
The HPC are successful in highlighting the massive difference in pay and quantifying in days/hours adds impact to the findings. The figures though do not take into consideration tax paid on earnings that benefit the economy and the effectiveness of the CEO in terms of improved company performance.
The debate as to whether CEOs are overpaid is well documented and I’m not getting into it, but even halving the CEO earnings would just give us Fat Cat Thursday.