CEOs in the UK 'are Europe's best remunerated'
Chief executives in the UK are the top earners in Europe, according to a comprehensive new study from Vlerick Business School's Executive Remuneration Centre at the University of Ghent in Belgium.
Aside from the fact that five of the top ten highest paid CEOs across the major European economies are based in the UK, the survey found that, among the largest firms, total compensation for chief executives in the UK averaged 5.65 million euros last year, compared to €4.27m in Germany, €3.15m France and €2.91m the Netherlands.
The study looked at FTSE100 companies in the UK, and all listed companies in Germany, France, Belgium and the Netherlands, representing a total of 669 companies.
Total CEO remuneration packages increased by 25 per cent during 2015 with only the Netherlands recording greater growth (28 per cent), By contrast, chief executives' pay in German stagnated and declined by nine per cent in France.
However, in terms of fixed pay, the UK only came third in the list after Germany and the Netherlands. The overall benefits packages in the UK were lifted by the much higher proportion of long- and short-term incentives, notably shares.
Even so, the study found that, across Europe, share-based remuneration is becoming less popular as an incentive. While 45 per cent of firms in continental Europe were granting share-based remuneration in 2007, the figure had decreased to 23 per cent in 2014. Even in the UK, share-based remuneration fell from 86 per cent firms offering it in 2013 to 75 per cent in 2014.
Prof Xavier Baeten, who headed the research, said, "It's clear from this research that the debate over how CEOs are remunerated is still extremely relevant. The UK has regained the top spot from Germany confirming the fact that the Anglo-Saxon corporate governance model, which is characterised by more dispersed share ownership, provides CEOs with more power in relation to the board, and leads to higher compensation levels.
"What is most interesting about these results, however, is what drives CEO pay. While 98 per cent of companies use financial KPIs (key performance indicators) based on such things as profit and share performance, under half incentivise bosses using non-financial indicators such as how well they treat their employees, customer satisfaction, environmental performance and the like.
"It seems to point to a pay culture that is still heavily weighted towards improving short-term performance, without much consideration for long-term stability. Last but not least, in fact, CEO pay is driven by one factor: firm size."
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