Comparing CEO pay: a closer look at the UK versus the US
We analyse how CEO compensation in the UK compares to the US, and why it matters for both companies and investors.
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The question of CEO pay levels is an important one for both investors and investee companies. Lower pay levels could see companies struggle to recruit and retain talented CEOs. Lack of compensation for exceptional performance may result in CEOs not being motivated to take risks or make bold investments in transformation and growth.
In this study, we analyse the difference in pay between CEOs in the UK and in the US. This study considers 2,353 CEOs at 1,980 companies across 30 US cities and four UK cities. We focus on the UK-US divide because of the competitive threat posed by American companies for several strategic British sectors like technology, healthcare, and consumer goods – which are competing for the attention of the same Western English-speaking consumer pool.
In every US city considered in our analysis, compensation packages were found to be higher than in any UK city. When adjusting for company size (which is a major driver of compensation), the package of the typical UK-based CEO was less than half the size of the typical US-based CEO. The difference is most acute for small and medium-sized companies.
Through a series of Key Informant Interviews with Schroders investors and investee companies, we delve deeper into how UK CEO compensation could better reflect and reward truly exceptional talent, while balancing the needs of different stakeholders. We also offer industry recommendations for a more competitive approach to pay.
There’s limited appetite in the UK to emulate the large no-strings-attached pay packages of the US, or to double the pay of all UK CEOs. However, exceptional talent does exist in the UK and it could be better rewarded. It’s imperative to build consensus on what good performance looks like and how that is best judged. Effective engagement with companies is essential to looking beyond spreadsheets, pinpointing top talent, and developing competitive packages in a way that maintains the confidence of the workforce and beyond.
- Click here to download the full research
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