Below is an excerpt from ISS-Corporate’s recently released paper “U.S. CEO Pay Advantage Over U.K., Europe Prompts Calls to Level the Playing Field”. The full paper is available for download from the ISS-Corporate online library.
Key Takeaways:
- Median total pay for FTSE 100 CEOs rose by 11% in 2023, slightly above a 10.2% increase for S&P 500 CEOs.1 By comparison, median realized total pay for STOXX Europe 600 CEOs dropped by 2.2% in the same year.
- The increases in FTSE 100 and S&P 500 total pay were primarily driven by higher long-term incentive (LTI) awards. The median CEO salary in the FTSE 100 also increased by 7.8%. The decrease in median total pay for STOXX Europe 600 CEOs was driven by lower vesting levels of LTI awards.
- S&P 500 CEO compensation remains much more dependent on LTI awards than the FTSE 100 or STOXX Europe 600.
- Median vote support levels for say-on-pay proposals have increased by 1.25 percentage points in the U.K. while dropping 0.2 percentage points in the U.S.
The wide pay gap between U.S. and its European counterparts has existed for years; however, the difference has become much more visible as U.S. CEO pay increased significantly and U.K. companies became more forthright with their struggle to retain and recruit talent against the competitiveness of U.S. compensation. London Stock Exchange CEO Julia Hoggett has chimed in, highlighting the need to have a “constructive discussion on the U.K.’s approach to executive compensation.” This issue has also prompted Schroders and the Investment Association to voice their concerns regarding the ability of U.K. firms to remain competitive against this continuing pay differential environment. STOXX Europe 600 and FTSE 100 companies are simplifying their LTIPs by allocating a greater percentage to restricted shares. Restricted shares have proven to be an effective retention tool by incentivizing executives to remain at a company longer due to usually longer vesting requirements.
In this analysis, ISS-Corporate looks at the pay gap between U.K., Europe and U.S. CEOs, specifically the FTSE 100, STOXX Europe 600 and S&P 500 constituents, in the period between FY2022 and FY2023.2
[1] For the purposes of this analysis, ISS-Corporate used the ISS definition of ‘granted pay’.
[2] The sample comprises FTSE 100 and S&P 500 companies where the CEO was in situ from FY2022 to FY2023.
By:
Stephan Stegmueller, Managing Director, Head of EMEA and APAC Advisory, ISS-Corporate
Karla Silva, Associate Vice President, EMEA Advisory, ISS-Corporate
Yan Xu, Associate Vice President, EMEA Advisory, ISS-Corporate
