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Help end the pay ratio scandal

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CEO pay, pay ratio, the Equality Trust, fairness four, 4 May elections, real living wageInequality in pay between the rich and the rest is a major driver of overall economic inequality in the UK.

On average, the Chief Executive Officers (CEOs) of the UK’s largest one hundred companies (the FTSE 100) take home around 190 times what the average employee takes home.

This results in the UK being one of the most unequal countries in the developed world and there is, rightly, great concern about excessive rewards at the top end of the pay scale compared to the amounts most people take home.

Given that the vast majority of working people in the UK rely on what they receive in their pay packets in order to live, it follows, therefore, that any inequality in pay between the rich and the rest is a major driver of overall economic inequality in the UK.

More unequal developed countries such as the UK suffer from poorer mental and physical health, poorer educational outcomes, and lower levels of trust in others.

Too often, bosses are treated as untouchable talent to be retained at all costs, while millions of workers are seen merely as costs to be reduced.

But there is still a lack of public knowledge and understanding as to just how extreme executive pay is compared to what most people have to live on.

Very few FTSE 100 CEOs earn less than £1 million a year. It is hard to escape the conclusion that becoming a CEO of a top company in the UK is pretty much like having a guaranteed, good-sized lottery win every year.

The aim of this report, produced by The Equality Trust, is to drill down beyond average figures to show, company by company, the pay gaps between CEOs and the average and lowest UK wages.

In doing so it can also reveal the extent to which some of our largest companies are more unequal than others in how they pay their staff.

When looking at the ratios in this report it should be remembered that these companies enjoy the privileges of limited liability which are granted, on our behalf, by the state when it issues their certificates of incorporation.

They also enjoy the privilege of listing on one of the world’s leading stock exchanges.

With these privileges come responsibilities, and The Equality Trust would argue that one of those responsibilities is for companies to pay their workforces fairly and not allow themselves to become engines of inequality that drive social and economic division in the UK.

In fact, Section 172 of the Companies Act 2006, in requiring the directors to promote the success of the company for its members, explicitly tasks them to have regard to the interests of the company’s employees, the impact on the community and the reputation of the company.

It could be argued that directors are flouting the spirit, if not the word, of the law when they preside over vast pay differences in their companies.

Given that there is a great deal of concern within the business community about inequality and much discussion about the role business has to play in tackling it, The Equality Trust has said it would therefore like to take this opportunity to invite all of the FTSE 100 companies to contact the Trust and let them know their views, and how they intend to manage their pay gaps in future.

In the meantime, The Equality Trust is campaigning for mandatory pay ratio reporting to be introduced for all medium and large companies (as defined in the Companies Act 2006) so we as a country can achieve proper transparency around pay inequality in the UK with a view to reducing it.

The Equality Trust wants to see these companies routinely disclose their top-to-median and top-to-bottom pay ratios so the public can see and compare companies by reference to how fairly they pay their employees.

The Equality Trust believes this will be a great incentive for companies to bear down on their pay differentials.

And here’s what you can do:

If you agree that we need to tackle pay inequality, please sign The Equality Trust’s petition here, and share this report and the petition with friends, family and colleagues as well as via any social media networks you might use.

For further information about how The Equality Trust sees pay ratio reporting working in tandem with other reforms, you can read the Trust’s recent submission in response to the government’s Green Paper on corporate governance.

Please do share this widely.

And there are plenty of other actions you can take to help tackle inequality in the UK:

Read this new activist pack Inequality Is Not Inevitable;

Join or form a local equality group;

Ask your employer to affiliate to The Equality Trust or ask other organisations or groups that you know of to affiliate;

Ask your employer or any employer (e.g. FTSE 100 companies) to disclose their pay ratios at Pay Compare.

Inequality is not inevitable. Together, we can reduce it and improve the quality of life for everyone in the UK.

Join in.

And just now there are – crucial – local and Mayoral elections coming up all around the UK in May so this is an ideal time to push for some simple policies that will materially reduce inequality and improve the quality of life where you live.

To help everyone take action, we have come up with four asks – The Fairness Four – that you can put to your sitting councillors and also candidates.

Ask them to:

1. Evaluate the likely impact of council policies on socio-economic inequality.*

2. Pay all directly contracted staff the real Living Wage (as set by the Living Wage Foundation).

3. Ensure all council contractors are required to pay staff the real Living Wage.

4. Publish a plan to reduce the pay ratio between the CEO and the lowest-paid directly employed council worker.

* As per the Socio-economic Duty, section 1 of the Equality Act 2010. This was, regrettably, not brought into force by central government but local councils can take action on this and many are doing so eg: Newcastle and other major cities.

The Equality Trust and Just Fair are campaigning to encourage the government to bring the duty into force; for more info, click here.

Please ask your councillors to sign up to the Fairness Four now!

You may be able to find your local council and Mayoral candidates here using this citizen-led database.

Your local council website and/or your local library may well also have candidate information.

Please forward any responses you receive from any councillors or candidates to us at info@equalitytrust.org.uk

If you want to campaign locally, here’s a downloadable leaflet which we recommend printing off as double-sided on A4.

By doing this action you are actively helping to build a fairer, better UK. So, thank you.

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