The heads of UK companies are amongst the top earners in Europe – five out of the ten highest paid chief executives across the major European countries are based in the UK, according to a new study. For the largest firms – those with a balance sheet total of more than €10bn – total compensation (median) adds up to €5.65 million in Britain, ahead of €4.26 million in Germany, €3.15 million France and €2.91 million in the Netherlands.
UK chief executive pay increased 25% between 2013 and 2014, according to the report by the Vlerick Business School’s Executive Remuneration Centre.
Professor Xavier Baeten, expert in reward management, 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.’
Professor Baeten adds that under half of organisations use non-financial indicators to measure CEO performance, for example, how well the company treats employees or its environmental performance.
‘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.’
Germany’s chief executives had the highest levels of fixed salaries at €1.32 million, followed by Netherlands bosses at €1.15 million yearly. In comparison, Britain’s CEOs have a higher proportion of their pay based on performance with 74% of their total compensation coming from both long term incentives (such as shares) and short term incentives (such as annual cash bonuses) the report concludes.