What’s the price of a life? Just £33,628 to the average FTSE CEO

Research shows top bosses lose only a fraction of their pay when employees die on the job. James Moore explains why the implications show this is more than just a grim fact

Cranes in the City: construction companies are well represented in the list of those that have suffered fatalities over the last four years (Getty Images)

What’s the price of a life? 

The remuneration committees of some of Britain’s biggest companies have come up with a number. It’s £33,628. So, yes, their thinking on this issue is about as attractive as a hail storm in the middle of an August bank holiday. 

That awful figure represents the average loss of earnings suffered by the highest-paid director at a basket of FTSE 350 companies considered by Pirc, an adviser which helps investors with their AGM voting decisions. 

Pirc looked at those suffering at least one occupational fatality over the last four reporting cycles. It considered the impact on the bonus payments to their top-earning director, usually the CEO. 

The report’s author looked at their overall bonus opportunity, how much health and safety contributed to the calculation and how much bonuses were reduced in years when fatalities took place to come up with that horrible number.

It represents little more than small change to a FTSE 100 CEO when you consider that their average earnings come in at just under £4m a year. It’s not the sort of number that would overly concern those running companies in the second tier FTSE 250 either (the FTSE 350 is made up of the two combined).

As you might expect, the businesses in Pirc’s sample included a lot of industrial, construction or natural resource concerns. Food and pharma were also represented. On the other hand, office-based businesses such as insurance companies were absent. But bear them in mind because they could play a role in fixing this. 

The argument remuneration committees typically make for the super-sized incentive packages they dole out is that CEOs need to be “incentivised” with truckloads of cash and free shares just to get out of bed in the morning. 

We know that those incentives can, and do, influence bosses’ thinking and behaviour. 

One of the reasons banks, for example, took crazy risks in the run-up to the financial crisis is because their leaders were encouraged to do so by the way their pay packages were constructed

Cost cuts are obviously popular with Britain’s bosses, because cost base is another metric that’s sometimes used in bonus calculations, and even when it isn’t, shares tend to go up when cost-cutting programmes are announced. Total shareholder return – which encompasses the share price and any dividend – is another important metric. Much more important than a lost life, which seems to be in the same ballpark as wearing a nice suit to the office on those days when you’re in. 

If a lost life costs CEOs less than 1 per cent of their total pay, but a reduction in costs could add 20 per cent or more to the pile, then some of them are going to put the latter above safety because safety usually costs money. 

Yes there are correctives other than bosses’ pay for companies that fail to take the latter seriously. You can start with the law, both criminal and civil, and stir in public and media outrage. 

But sometimes these aren’t enough. 

It’s also absurd that a person on the ground found to have contributed to the loss of a life could lose their job or at the very least find themselves demoted while the CEO, responsible for overseeing in the policies they operated under, stands to lose what to them is the equivalent of a Mars Bar. 

In the case of contractor Balfour Beatty, where Pirc calculated a lost life cost the CEO £12,500, it’s not even a half Mars Bar.  

Back to those insurance companies. As big shareholders they have the capacity to change this by demanding that remuneration committees, which are supposed to represent their interests but rarely do, change their practices.

They also stand to save money through lower claims against, for example, from death in service policies and the like, before you consider the moral case in the midst of a pandemic, which has led to the development of a welcome, and overdue, conversation over the issue of workplace safety.