Executive pay gap

MQT on 2017-01-18
Session date: 
January 18, 2017
Question By: 
Jennette Arnold OBE
Labour Group
Asked Of: 
The Mayor


Within a few working days of the year, the highest paid executives earn more than the average worker earns in a year. What action can you take to reduce the pay gap between those on the highest and lowest salaries in London?


Answer for Executive pay gap

Answer for Executive pay gap

Answered By: 
The Mayor

Sadiq Khan (Mayor of London):  Thank you for your question.  Average chief executive officer (CEO) pay in Financial Times Stock Exchange (FTSE) 100 companies quadrupled between 1998 and 2015, according to DBEIS.  Compared to the average pay of someone working full-time in the UK, the average FTSE 100 CEO earned 128 times that amount in 2015.  I am aware that current shareholders must now vote on pay policies for directors of publicly traded companies like the FTSE 100.  However, there are many large private companies not required to follow these rules. 


Last year the Government published a Green Paper to ask whether these reforms to corporate governance first introduced in 2013 should be strengthened.  This could introduce a new reporting requirement on ratios between CEOs and the wider company workforce.  In London, I am planning a new business compact with employers that is aiming to make London the best place in the world in which to work, and that includes ensuring all Londoners earn a decent wage.  It will reward and recognise those employers who pay the London Living Wage.  When companies are successful and they choose to reward senior executives, I believe it is only fair for lower-paid staff to be rewarded as well.  At the very least, the lowest-paid workers in London should receive the London Living Wage of £9.75 an hour. 


The widening gap in pay between the highest and lowest paid has also led to greater gender inequality and inequality for black and minority ethnic (BAME) Londoners.  For example, half of FTSE 100 companies do not have any BAME directors, and less than 10% of FTSE 100 executive directors are women.  Across London, only a third of managers, directors and senior officials are women and just over a quarter are from BAME backgrounds.


There are some improvements taking place and I welcome the commitment by over 90 financial services companies and firms to sign up to Her Majesty’s (HM) Treasury’s Women in Finance Charter, which will link the pay of senior executive teams to delivery against company targets on gender equality.  I am pleased that Jayne-Anne Gadhia, the Virgin Money CEO who spearheaded this Charter, has recently joined my new Business Advisory Board.  My economic fairness team will work with employers with the aim of making London the best place to work in the world.


Jennette Arnold OBE AM (Deputy Chair):  Thank you for that really comprehensive answer.  What I can promise you is that I will be looking at it and I will be coming back to you, I am sure, about various aspects of that. 


Before I put my follow-up question, Mr Mayor, can I just thank you for your letter earlier this week to the capital’s Premier League football clubs asking them to join you in working to make London a Living Wage city?  You will remember that we had this discussion at the last MQT.  Thank you for that follow-up action and, please, just reassure me that it is not going to stop at a letter, that you will keep on demonstrating your absolute commitment to this and that you will just keep on kicking this ball until you get the goal that you want.  Did you like that?


Sadiq Khan (Mayor of London):  I agree completely.  Can I just say that it is worth us naming and praising?  Chelsea is a London Premier League club that does pay the London Living Wage and it might make many of us vomit to say nice things about Chelsea but we should.  It deserves credit for doing so.  My point is that the other London Premier League clubs should follow suit.


Jennette Arnold OBE AM (Deputy Chair):  Yes, exactly.  Again, thank you.  I will get back to you about the comments that you made about the gender inequalities because we could follow that up with an MQT all of its own because it is so awful.


Today let me just ask you about the promise that you made in your manifesto about this team that you would have in your office dedicated to economic fairness.  It is just to update us.  Is this team up and going and what size is the team?  In particular, what guidelines have you given it about this whole issue of working around actions that will narrow this amazing disparity between the top end and those who are struggling at and below the London Living Wage?


Sadiq Khan (Mayor of London):  One of the things we have to do is get our own house in order.  The economic fairness team is made up of officers from City Hall and is working closely to get our house in order.  You will recall I was the first Mayor to publish a gender pay audit and we had all the functional bodies do the same.  I have also looked at the ratios within our own GLA family - it is not great - in relation to the disparity between the top and the bottom.  It is much better than many of the others and so we are trying to improve that.  The economic fairness team is making sure that we learn the lessons from the private sectors.


One of the things we are keen to do is have a business compact.  It should not just be public sector employers who are good employers, crucial though it is.  We want private sector employers to be good employers as well.  The business compacts will be a way of naming and praising. 


Also, think about procurement.  Think about the impact we could have in giving contracts and saying, “We want you to bid for contracts.  One of the things we are looking at when you bid for a contract is how many apprenticeships you have.  What is your pay ratio?  We will check you are a Living Wage employer”.  We could go on. 


Just to give you an idea of the potential here, something like more than two-thirds of TfL monies are spent on procuring things and so there is lots of scope there.  You will be aware from the statement I made earlier last week - referred to in MQTs earlier on - that London First is a very important partner of ours in relation to not simply a direct deposit scheme but encouraging employers to be good payers of Londoners as well.  The basic principle is this: you do a hard day’s work, you get a decent day’s pay.


Jennette Arnold OBE AM (Deputy Chair):  I will get back to you about a number of things that you have said.  Quickly, who is the deputy leading this area of work?


Sadiq Khan (Mayor of London):  In relation to pay?


Jennette Arnold OBE AM (Deputy Chair):  Yes, corporate responsibility and pay.


Sadiq Khan (Mayor of London):  It crosses the mayoralty.  Matthew Ryder [Deputy Mayor for Social Integration, Social Mobility and Community Engagement] is working hand-in-glove with the team because of the issues he does around social integration and communities.  Ryder has a big role to play in relation to getting businesses signed up to this.  The business compact is important.  We have to speak to the trade unions as well as the employers to make sure we get the business compact right.


Jennette Arnold OBE AM (Deputy Chair):  Thank you.