Research commissioned by CFA UK has examined the alignment of chief executive (CEO) pay and company value creation between 2003-2014/15 and found that total pay for the median CEO increased by 82% in real terms over the period. However, the median FTSE-350 company generated little in the way of a meaningful economic profit over the period 2003-2009 , and although performance improved from 2010 onwards the median firm generated less than 1% economic return on invested capital.

The study was carried out by Steven Young, and Weijia Li of the Lancaster University Management School, where Young is professor of accounting.  CFA UK said the study's findings  are relevant to the design and administration of senior remuneration arrangements among UK listed companies.

The research found that CEO pay rose in a linear upward trend until the financial crisis in 2008-2009 when pay levels slipped back to 2006 levels. Meanwhile, the level of value creation was low in absolute terms and erratic from year to year. CFA UK said companies create value when they generate economic profits, defined as returns to all capital providers in excess of the weighted average cost of raising funds. Economic profits differ from accounting profits and share returns because the latter metrics do not include a charge for the full cost of invested capital.

CFA UK said that simplistic metrics of short-term performance such as earnings per share (EPS) growth and total shareholder return (TSR) are the dominant means of measuring performance in CEO remuneration contracts. However, these metrics correlate poorly with theoretically more robust measures of value creation that relate performance to the cost of capital.

Will Goodhart, chief executive of CFA UK said:“Remuneration committees have spent more time than ever before this year in reaching out to shareholders and stakeholders to discuss compensation structures. There is an intense focus on pay levels coupled with calls to find better ways of aligning senior executives’ incentives with long-term value creation, which for our members is more often measured through economic profit than through accounting profit. Compensation practices in the UK have come a long way in recent years, but this report’s findings demonstrate that there is far still to go and that too few of today’s popular approaches – such as EPS and TSR - genuinely align senior executives’ pay with the economic value that they create.”

Meanwhile the High Pay Centre  dubbed  Wednesday (4th January 2017) "Fat Cat Wednesday"  after the think tank calculated that by around midday on that date FTSE  100 CEOs will already have made more money than the  typical UK worker will earn all year.

The median pay for a FTSE 100 CEO in 2015 was £3.973 million, based on the publicly disclosed “single figure” measure the High Pay Centre reported. By its calculations it found that even if CEOs are assumed to work long hours with very few holidays, this is equivalent to a rate of pay of over £1,000 an hour. According to figures from the Office of National Statistics median earnings for full-time workers in the UK, who had been in their job for at least 12 months, were £28,200 in 2016.

High Pay Centre director Stefan Stern said: "Our new year calculation is not designed to make the return to work harder than it already is. But ‘Fat Cat Wednesday’ is an important reminder of the continuing problem of the unfair pay gap in the UK. We hope the government will recognise that further reform to pay practices are needed if this gap is to be closed. That will be the main point in our submission to the business department in its current consultation over corporate governance reform."

Stern added: "Effective representation for ordinary workers on the company remuneration committees that set executive pay, and publication of the pay ratio between the highest and average earner within a company, would bring a greater sense of proportion to the setting of top pay."