FTSE 100 CEO pay is 120× the median worker salary. Up from 47× in 1998. The question is whether restricting it would change anything structural — or just move money around.
"High executive pay attracts the talent that creates more value than it captures. A CEO who grows a £10B company by 15% creates £1.5B in value for shareholders — a £5M salary is still a bargain. Restricting it doesn't destroy that value, it just offshores the talent to jurisdictions that don't restrict it."
This argument is internally consistent. It assumes: (a) CEO talent is scarce and mobile, (b) CEO decisions drive significant share of corporate performance, (c) pay-for-performance is how markets allocate that talent efficiently.
Apply the honest measurement test: if high CEO pay were attracting talent that creates value, we'd expect productivity to correlate with pay. UK productivity grew 0.3%/yr from 2010–2023. CEO pay grew 8%/yr over the same period. The 25× gap between the two growth rates is not explained by the talent theory.
The comparison that breaks the argument: Germany and Japan have CEO-to-worker pay ratios of 50–60× and 30–50× respectively. Both have higher productivity growth than the UK over the same period. If high pay were required to attract productivity-driving talent, the relationship would run the other way.
The profit share of GDP hitting its highest level since 1955 during a decade of 0.3% productivity growth tells you where the gains went. Not into value creation — into extraction. The Cantillon mechanism again: money flows to asset holders, not to output.
The QE mechanism explains the decoupling directly. The Bank of England created £895B through quantitative easing (2009–2022). Asset prices — equities, property — rose. House prices increased 231% from 2000–2023 while real wages grew 0.4% over the same period. CEOs who manage asset-heavy companies captured the asset inflation through share price growth linked to their bonus packages. Productivity measures what the economy produces. Asset inflation measures who owns what. When QE inflates assets without increasing output, pay ratios rise without any productivity justification.
Shareholder buybacks complete the picture. FTSE 100 companies spent more on share buybacks between 2010 and 2023 than on capital investment. Buybacks increase share price mechanically — which triggers CEO long-term incentive plans tied to total shareholder return — without creating any productive output. The mechanism is circular: low investment → low productivity growth → high buyback spending → rising share prices → CEO bonus triggers → higher pay ratios. The talent theory cannot explain a circle.
Sources: High Pay Centre (2024), ONS Productivity Statistics, ONS Wealth & Assets Survey.
These don't cap pay. They change the structure that currently rewards short-term extraction over long-term value creation.
CEO pay decoupled from productivity because Invariant 2 (Sound Money) was broken: £895B of QE created asset inflation without output growth. The measurement problem (Invariant 3) compounds it — shareholder return includes capital gains on inflated assets, so "performance" bonuses reward inflation capture, not value creation. The Money Printing Loop closed: QE → asset inflation → CEO pay rises → reported as "talent cost" → more QE to sustain asset prices.