FAT CAT FRIDAY
Happy New Year to you… just four days into the year and an intriguing email headline grabbed my attention. Fat Cat Friday, which succeeded in gaining my attention as I had not heard the term before.
It seems that Friday 4th January is the point at which many CEOs of FTSE100 companies will pass the average earnings of most people in the UK – on day 4 of 365. Recent research by CIPD found that the average FTSE100 CEO earns £1,020 per hour, with a package worth nearly £4m. According to the ONS the median weekly earnings for a full-time worker in the UK was £569 a week (£29,588 a year) in 2018. When the hourly rate is worked backwards, by lunchtime today, the typical CEO would have already earned more than the median full-time employee.
Playing Footsie
All of us (those with any investments at all) are likely to have holdings in FTSE100 companies. It would be incredibly rare not to hold any investment without some of it in FTSE100 companies. There is growing concern about the remuneration of CEOs, who often appear to be rewarded irrespective of success or failure. To provide some context, 2018 was a bad year for investors – the FTSE100 opened in January on 7,648.10 and closed on 31 December at 6,728.13 a fall of 12%. That said, a 12% fall is normal in historical terms, it is certainly within the range of expectations that any investor ought to have. Of course, I have not made allowance for income (dividends) which is a share of profits which was also paid to owners of the shares in the UK’s largest businesses.
The FTSE100 itself was an index launched in 1984, back then a business needed to be worth £100m+ to be listed in the Index, in 2018 it was more like £4bn. However, by February 2018 only 29 of the original companies were still part of the index. These are enormous companies, employing over 6.8m employees between them on a global basis. Even if Brexit ever happens, some 70% of business revenues are generated from outside of the UK. The UK remains the place to list a business.
I’m not suggesting that CEOs deserve to be rewarded such huge sums and neither would I want to infer that these 100 or so people are personally responsible for 6.8m jobs, there are genuine issues about fair and proper remuneration. The issues of inequality and the vast differences between the top and bottom (or even middle – which is what the median is) is an uncomfortable truth. Investors have the power to vote on remuneration and many FTSE100 AGMs simply miss the opportunity to give this some serious consideration.
Dominic Thomas
Solomons IFA
You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk