The initial response of the top UK companies to new reporting requirements was not to curb executive pay or improve the link CEO pay and firm performance at FTSE 100 companies, but led instead to “opportunistic reporting for the sake of reputation management,” says a study from Cambridge Judge Business School and King’s College London.

The research looked at 91 UK companies (excluding those FTSE 100 firms not incorporated in the UK and thus exempt from the disclosure regulations) over three fiscal years ending in 2014, which included the first-year results of UK disclosure rules that took effect 1 October 2013, which applied to quoted UK companies in financial years ending on or after 30 September 2013.

The study found that in 2013 the average chief executive (CEO) earned £5.57 million in total (including salary, bonus, benefits and equity pay) with cash pay (salary and cash bonus) of £1.64 million, compared to £4.68 million and £1.57 million, respectively, in the two-year period before the regulations took effect. The ratio of total CEO pay to average employee pay was stable between the pre- and post-regulation periods, from 123.01 to 122.37, the study found.

The research also looked at the requirements for a comparison of CEO pay and other employee pay, and found that firms had a “high degree of flexibility and variation” in choosing their comparator groups – with only 24 of the 91 firms including employees from all geographic regions and all levels. Some firms chose only an “arbitrary percentage” of employees (such as 40 per cent), or only senior management, or only employees in certain geographic areas such as London.

“We therefore question whether this disclosure truly assesses the issue of widening pay gap,” the study said. “Instead, managers may have opportunistically engaged in reputation management by cherry-picking the group of employees that best serve for comparison. In our opinion, this disclosure falls short in addressing concerns of greater transparency in disclosure of wage inequality.”

“We find that the new regulations did not appear to achieve their goal of greater transparency,” said study co-author Dr Jenny Chu of Cambridge Judge Business School. “Companies have such wide discretion as to which employees they include in the comparator information that this disclosure really loses its effectiveness. We also found that in their first year the rules didn’t enhance the link between CEO pay and performance, nor did they reduce the CEO-employee pay discrepancy.”