Cap at 10: What Actually Happens When You Cap CEO Pay

Sixty-five percent of Britons want CEO pay capped at ten times the lowest wage in the company. The same question put to Swiss voters in 2013 was rejected by 65.3%. Same number, opposite answer. The difference was the debate.

1. Roughly a Quarter of the Number

The median FTSE 100 CEO earned £4.58 million in 2024/25. That is a record. It is also the third year in a row it has been a record.

Of that figure, somewhere between £800,000 and £1.2 million typically arrives as base salary. The rest is bonus and equity. Annual bonuses average £1.61 million and are paid to 93% of FTSE 100 CEOs. Long-Term Incentive Plans (LTIPs) average £2.26 million and are paid to 84% of executives. LTIPs are grants of shares and options, often conditional on performance targets, often paid out years after they are awarded.

A rule that caps "the highest-paid employee" at 10 times the lowest wage constrains roughly 20 to 25% of what a FTSE 100 CEO actually earns. It constrains the rest only if the rule explicitly names it: bonuses, deferred cash, vesting shares, carried interest, options. The Green Party proposal as published does not specify. That ambiguity is not a footnote. It is the whole policy.

The precedent is recent. The EU capped banker bonuses at twice fixed salary in 2014. The European Banking Authority tracked the result. The ratio of variable to fixed pay fell from 104% to 65% in the first year. Total remuneration did not fall. Banks simply raised fixed salaries to cover the gap. The cap moved money from one column to another. It did not take any of it away.

2. Outsourcing: the Easiest Route

The fastest way to satisfy a 10x cap is not to cut the CEO's pay. It is to make sure the company does not directly employ anybody paid the minimum wage.

FTSE 100 companies already contract out cleaning, catering and security to specialist providers. Mitie. ISS. Sodexo. The cleaners are in the bank's building every morning. They are not on the bank's payroll. Under a 10x rule applied to direct employees, that existing structure becomes a compliance advantage. The denominator of the ratio improves without anybody at the bottom getting a pay rise.

LSE research tracked FTSE 100 pay structures from 2000 to 2015. Over those fifteen years, outsourcing of low-paid functions grew from 15% of firms to near-universal. Over the same period, CEO stock-based pay grew from 39% of the package to 79%. The two curves moved in parallel. As companies pushed the lowest-paid workers off the payroll, executive pay detached from all-employee wages and attached itself to the share price instead. A 10x rule would pour fuel on the same fire. Firms that have already outsourced their low-wage work start with the advantage. Firms that have not get a direct financial incentive to catch up. The bill for compliance gets sent to the cleaners.

What this means in practice: a facilities manager employed directly by a bank has access to that bank's pension scheme, sick pay entitlements and in-house HR functions. Employed by a contract cleaning company instead, she has whatever the contractor offers. At the lower end of the market, that is worse. The policy's reach ends where her employment does.

There is a more structural version of the same trick. A company reorganises as a tiered holding chain. A parent entity employs only senior executives, where the lowest-paid employee earns enough to keep the CEO within 10:1. Operating subsidiaries sit underneath, each separately compliant. Two tiers of 10:1 produces an effective 100:1 ratio between the CEO and the lowest-paid worker doing the actual work. Three tiers produces 1,000:1. A rule that bites at the level of the individual legal entity would not touch any of it.

3. When Outsourcing Is Not an Option, Automation Is

Not every minimum-wage job can be sent to a contractor. A supermarket cannot outsource its checkout staff. A logistics firm cannot subcontract its warehouse pickers while keeping them in the same warehouse under somebody else's brand. For these employers, the 10x rule creates a different incentive. Replace the worker with a machine and the denominator rises automatically.

Self-checkout, automated sortation, robotic goods-to-person picking. These have all been advancing on their own commercial logic. Amazon, Ocado, most large supermarkets. A statutory pay ratio cap adds a regulatory incentive on top. Every minimum-wage worker on the payroll is now a ceiling on executive compensation. Replace that worker with a machine and the ceiling disappears.

Academic research on automation consistently finds that job losses concentrate in routine, lower-wage occupations. Those are the same roles the pay ratio rule uses as its floor. Whether the cap actually tips any given firm's investment decision is impossible to say with confidence. The incentive structure points one way.

4. What the Cap Does to a Talent-Driven Business

Outsourcing and automation adjust at the bottom of the pay range. They work where the top earner is a chief executive and the lowest earner is a cleaner. A material slice of British plc is not built that way. In football, investment banking, asset management, film and TV production, the highest-paid employee is not an executive. They are a specialist whose market price sets the revenue the business can earn. A 10:1 cap in those industries does not compress the package. It dissolves the business.

Peter Atherton, an independent analyst (better known for his energy commentary), worked the Liverpool FC numbers on the day the poll was published. The summary is worth sitting with.

Liverpool FC 2024/25 accounts: £703m revenue, £440m wage bill, £8m post-tax profit. That wage bill alone generates around £240m for HMRC in income tax and employee/employer NIC. The club employs 1,100 full-time staff plus around 3,000 on match days.

Apply a 10:1 cap. On a notional £20,000 lowest wage, the highest-paid employee is capped at £200,000. Every player and every coach sits under that ceiling. The wage bill falls from £440m to around £45m. On Atherton's arithmetic, owners' profits would rise from £8m to £403m. The rule sold as extracting money from billionaire owners hands the owners an extra £395m on day one.

Then the revenue side catches up. £200k is mid-Championship wages. That is the quality of squad the Premier League could hire. TV rights would re-price to Championship levels. UEFA revenues would disappear because English clubs would be out in qualifying rounds. Commercial deals would collapse because the product is no longer globally marketable. Match-day pricing is the only lever that holds, and only on general admission: hospitality drops. Atherton's reckoning is that total revenue falls from around £700m to under £100m. That is Celtic and Rangers territory.

At that revenue level the 1,100 full-time jobs are gone. Championship clubs typically employ 200 to 300. The £20m-a-year academy closes. The £10m subsidy to the Women's team stops. Across the twenty Premier League clubs, roughly 10,000 full-time jobs disappear, and HMRC's tax take from the division falls by £2 to £2.5 billion.

The point generalises. Any business whose revenue depends on hiring the best specialists in a global talent market faces the same equation. A hedge fund. A film studio. A pharmaceutical research unit. A top-tier law firm. The cap does not compress the top earners, because top earners can work for a foreign employer not subject to the cap. It simply takes the business out of the country. The tax base goes with it. The jobs go with it. The owners can take the windfall for a year or two before the revenues collapse. The workers at the bottom, the ones the rule was written to help, lose their jobs first.

5. Switzerland, 2013: the Same 65% Said No

In November 2013, Swiss voters considered the 1:12 Initiative. Proposed by the Young Socialists, it would have capped the highest-paid employee in any company at 12 times the lowest-paid. The initiative had cleared the 100,000-signature threshold. It was backed by a serious political movement. Pre-vote polls showed majority support. On the day, 65.3% of voters said no.

The arguments that turned the polling were about mechanism. Critics made the outsourcing point explicitly. Opponents explained the tiered subsidiary trick. They worked through the banker-bonus-cap precedent. The Swiss political culture examines policy at length before voting on it. A majority concluded that the proposal did not achieve what it promised.

YouGov polled 6,137 British adults on 17 April 2026. The question: would you support or oppose capping the maximum wage for bosses at no more than ten times the lowest wage in that company. 65% said support. 17% said oppose. The question captures support for a principle. It does not engage the mechanism, the avoidance routes, or the effect on the workers the rule is meant to protect.

The Swiss vote was a different country, a different year, a different question. None of that makes it irrelevant. The gap between support for a principle and support for a mechanism is the same gap in both places.

6. A £145,000 Question: Who Counts as Lowest-Paid?

Four years of mandatory pay ratio disclosure under the Companies Act 2018 have already shown how elastic the denominator is. FTSE 350 firms are required to publish their CEO-to-worker pay ratios annually. The High Pay Centre's analysis of the first set of disclosures found ratios ranging from 8:1 to 2,605:1. Some of that variation reflects genuinely different business models. Most of it reflects choices about how to count part-time and seasonal workers.

A statutory cap makes those choices financial. "Lowest wages in that company" means what exactly. The lowest hourly rate. The lowest annualised pay. A part-time worker at the National Living Wage (£12.71 per hour from April 2026) doing 18 hours a week earns £11,897 annualised. 18 hours is the Universal Credit Administrative Earnings Threshold, the level at which work-search requirements ease. A full-time worker at the same hourly rate earns £26,437.

Under a 10x rule, the CEO ceiling is either £118,970 or £264,370 depending on which figure the company is permitted to use. The gap between the two is £145,000 per CEO per year. That is the financial value of the scheduling incentive the definition creates. Cut the hours of the lowest-paid workers and the CEO can be paid an extra six figures. The rule that was meant to help the workers at the bottom gives employers a concrete reason to schedule them for fewer hours.

The historical record on compensation regulation is not encouraging. In 1993, the Clinton administration capped the tax deductibility of executive salaries at $1 million. Academic analysis found that CEOs below the threshold raised their base salaries toward it. CEOs above the threshold shifted into performance-based equity, which was explicitly exempted. Total executive pay rose. When the EU capped banker bonuses, fixed salaries rose to compensate. When the SEC mandated pay ratio disclosure in 2018, firms used every permitted discretion to present their ratios favourably without measurably reducing CEO pay. Caps on one form of remuneration reliably produce substitution into others. That is not a cynical claim. It is the documented pattern.

A serious version of the policy would try to close the obvious routes. Define pay on a total-remuneration basis. Include agency and contracted labour in the denominator. Apply the rule across the consolidated group, not the individual legal employer. Every one of those fixes is available in principle. Every one of them makes the cap more complex, more contestable in court, and harder to administer. None of them resolves the underlying problem, which is that firms adjust at organisational margins, and those margins are closest to the lowest-paid workers.

7. The Verdict

FTSE 100 median CEO pay is £4.58 million. Full-time NLW annualised is £26,437. A strict 10x cap applied to total remuneration would reduce median CEO pay to £264,370. That is a 94% cut. Applied to base salary alone, with equity and bonuses untouched, the effective constraint is around 75% of the cash wage on roughly 20% of the total package.

Before any of that happens, a firm has the full menu of adjustment routes. Outsource the cleaners. Automate the checkouts. Reorganise into tiered subsidiaries. Cut the hours of the part-timers. Shift compensation from salary into equity. Every one of those routes has been used before. Every one of them shifts the burden onto the workers the rule is supposed to help.

The principle is not wrong. The gap between the top and the bottom of a FTSE 100 pay scale is 122:1, and it has been widening for a quarter of a century. A political majority is uncomfortable with that. The 65% figure reflects a real public mood. What it does not reflect is any debate about the mechanism. The Swiss had that debate. The UK has not.

A policy that lets 94% of CEO pay walk out the side door while schedulers trim the lowest-paid workers' hours to clear the numerator is not a cap on executive extraction. It is a cap on nothing in particular, paid for by the people at the bottom. The 65% would not vote for that. They should be asked.