Executive pay packets have now ballooned to nearly 180 times that of the average worker, a new report has found.
The High Pay Centre think-tank used the figure to call on the government to force companies to cap executive pay at a fixed multiple of their lowest-paid employee, marking an increase from 60 times the average pay in the late 1990s.
Shareholders were still approving high executive pay deals despite getting new powers to vote them down at annual meetings, the think-tank said. Meanwhile, its report found that the pay of the average FTSE 100 chief executive increased from £4.1 million to £4.7 million last year.
The High Pay Centre warned that the perception of executives "reaping all the rewards from economic growth" risked damaging trust in business.
Deborah Hargreaves, director at the think-tank, said: "It’s time to get serious about tackling the executive pay racket. The Government’s tinkering won't bring about a proper change in the UK’s pay culture. We need to build an economy where people are paid fair and sensible amounts of money for the work that they do and the incomes of the super-rich aren’t racing away from everybody else."
Oliver Parry, corporate governance adviser at the Institute of Directors, warned against "sweeping government intervention" as a way of reining in executive pay.
"The implausible suggestion that pay multiples would be written into a new, legally-binding Corporate Governance Code undermines the whole idea. The code operates successfully on a comply or explain basis, and there is no reason to think this will change, nor should it," he added.
“This is the first year that shareholders have been able to use a binding vote on executive pay policy. It would be bizarre to introduce the extreme intervention of pay multiples while we are waiting to see how investors use their new powers.”
Bank of England governor Mark Carney recently savaged bankers' over how "disturbingly" rich they had become, in an attack on City greed.
Carney said globalisation had resulted in huge earnings which were "amplifying the rewards of the superstar" while "disturbing evidence" suggested opportunities for social mobility were narrowing.
The governor said in the run-up to the crisis "banking became about banks not businesses" while financial products designed to meet the needs of firms "morphed into ways to amplify bets on financial outcomes".
"When bankers become detached from end-users, their only reward becomes money. Purely financial compensation ignores the non-pecuniary rewards to employment, such as the satisfaction from helping a client or colleague succeed."