The growing CEO pay gap is killing workplace culture

ALSO: being able to walk to work makes us as happy as falling in love

The CEO pay gap in the UK is the highest level it’s ever been - and it’s the cause of growing culture clashes in firms

Work by the High Pay Centre published last week shows that median FTSE 100 CEO pay (excluding pension) currently stands at £3.81 million, 109 times the median full time worker’s pay of £34,963.

This means that the average FT 100 CEO earns as much by lunchtime on 4th January as their workers earn all year.

Work by the esteemed social scientist Professor Alex Haslam and his colleagues have shown that the most effective forms of leadership are ‘identity-based leadership’ where workers can say that ‘bosses here are a good example of the people at the firm’.

It's why good culture often has a strong sense that ‘we’re all in it together’.

Huge pay gaps serve to undermine that. Messages of frugality and cost savings end up being interpreted as spin and misdirection. Internal communication is often seen through a lens of Us and Them.

Big pay gaps serve to undermine attempts to create cohesive culture.

The best firms are able to cultivate a sense that collectively striving to achieve results. A hundred-fold pay gap means that employees are left thinking that there’s nothing more than a degree of exploitation taking place.

It doesn't escape workers’ attention that CEO pay rises have been accompanied by job cuts. Good culture is built on trust and trust doesn't exist without honesty. The more that bosses are seen to be lining their own pockets the harder a trusting culture is to build.

• This piece in the newsletter of the Hidden Brain podcast is fascinating about the role of laughter in conversations. TL;DR more laughter makes conversation less satisfying but more connective. If you’ve laughed a lot in a conversation you’ll end up feeling that you have something in common but not that you’ve had a deep discussion. I loved this detail (which is again about the joy of talking to strangers and the role of laughter as a social lubricant - see also here): ”If you intrinsically enjoy talking to strangers and feel comfortable doing so, you may not feel the need to laugh a lot and smooth out the interaction”)

• Diversity, Equity and Inclusion jobs were heavily slashed in the tech sector in 2023

• Fall in love with a walk to work: Objective happiness comparisons can feel arbitrary but I really love them. Last year I shared a stat that said if you have a best friend that you see every day it’s the happiness equivalent of earning an additional $100k salary. (I cross it out because that number was from 2007, I went back and worked out that it’s actually worth £137,000 in today’s UK money). Here’s another one “Someone with a one hour car commute needs to earn 40% more to be as happy as someone with a short walk to work. On the other hand, if someone shifts from a long commute to a walk, their happiness increases as much as if they’d fallen in love”. What does it all mean? Well it helps to explain how we feel…

• New York Times feature on why there are so many new office developments being constructed in the City of London right now - many of them representing a gamble on the Return to the Office. “The number of people entering and exiting London Underground stations in the Square Mile is, on average, about three-quarters of prepandemic levels.” Office occupancy of new-build sites is higher than old stock but across many cities the retail parts of mixed-occupancy buildings are sitting empty due to low footfall. With so much money at stake expect more stories like this one preaching that “you can’t have that vibrancy if you don’t have that work force back”

• Along those lines this article in the Daily Telegraph explains the challenges to the commercial property sector right now. Demand for class A property is holding up but the value of B and C grade property has collapsed. “It’s stuff that’s competitively obsolete: side-streets, dark buildings. You can’t give them away”. What’s the consequence? The Telegraph piece suggests that bank collapses are on their way…

• Another outstanding NY Times article about a worthwhile obsession - creating affordable housing. Last month I shared a HBR article about the evolution of cities. Big Mega Cities aren’t going anywhere, and are going to remain important to economies. With that in mind we need to ensure they can become more affordable to live in. The NYT piece asks how New York could add housing for one million additional inhabitants. I’d love to see a similar exercise for British cities - it could help address the concerns that WFH have hollowed out our metropolises

• A firm who told an interview candidate that they wanted to hire ‘fewer white men’ was found not guilty of discrimination, with the judge saying that a desire to improve diversity wasn’t prejudicial to any particular candidate

• How old do you feel? For most of us the answer is the same, about 20% younger than our actual age

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I really liked it recently when Christine Armstrong said in one of her brilliant video posts that workers don’t really want flexibility as much as predictability of work.

It's stayed in my head. Which is why this research about onsite workers really stood out. I'm often asked by clients 'how do we give the equivalent of hybrid flexibility to in-store workers?'

The answer is that people want the ability to control their shifts, to swap easily with colleagues, to get their working hours four weeks upfront. We all want to predictability.

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