Lavish executive rewards based on self-serving myth, says High Pay Centre

EXECUTIVE PAY

Lavish executive rewards based on self-serving myth, says High Pay Centre

The notion that lavish executive pay packages are needed to prevent an exodus of talented CEOs abroad is a “self-serving myth”, according to a study released by the High Pay Centre today. The vast majority of the largest global businesses recruit from within, and only a tiny number of companies look outside their country to find a successor who is in another CEO role. In fact, the report found that fewer than 1% of chief executives are poached from overseas, while eight in ten are promoted from within the company.

Director of the High Pay Centre, Deborah Hargreaves, said: “The global talent pool is, in fact, a drop in the ocean. These findings debunk the myth about internationally mobile chief executives flying around the world for new roles. This is one of the reasons for the sharp rises in executive pay in the past decade.”’

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Key findings

Drawn from an analysis of CEO appointments from the 500 largest companies in the world, the report shows:

• Only four chief executives out of 489 were poached while serving as a CEO of another company in a foreign country – just 0.8% of total appointments.
• Only one CEO was poached while employed as a chief executive of another company in another continent.
• In North America, Japan, Latin America and Eastern Europe not one CEO was appointed from outside the country where the company is based.
• 80% of CEO appointments were internal promotions.
• Just 6.5% (32) of current CEOs were poached from another company while serving as a CEO.

A final word

“Huge executive pay packages can no longer be justified on the basis that there is a competitive international market for chief executives. For the vast majority of these top executives, their priority is to develop the company and its people, and turn the business into a world leader. Shareholders should be wary of the person who is incentivised purely by the bonus – as this is what led us into the financial crisis we see today.” - Deborah Hargreaves, Director of the High Pay Centre.

Want to know more?

Title: Global CEO Appointments: A Very Domestic Issue, High Pay Centre, February 2013

Availability: You can download the report in PDF format at http://highpaycentre.org/pubs/the-myth-of-global-high-pay-talent-market.

The High Pay Centre is an "independent non-party think tank established to monitor pay at the top of the income distribution and set out a road map towards better business and economic success." For more information visit http://highpaycentre.org.