Typical FTSE 100 CEO pay hits record £4.2m but still lags behind US

London Stock Exchange CEO Julia Hoggett has weighed in, as have individual CEOs and lawyers, with some arguing that CEO compensation needs to rise, while others believe it’s already more than adequate compared to the average employee.

In a new development, the average salary of chief executives of Britain’s 100 biggest companies has just risen by 2% to reach a record £4.2 million ($5.4 million) in 2023 and more executives are being paid more than £10m than ever before, according to the data. a High Pay Center report released Monday.

Economic trends have favored top bosses in the city, including a rebound in growth following the COVID-19 pandemic.

AstraZeneca’s Pascal Soriot and Rolls Royce’s Tufan Erginbilgic were among the highest-paid CEOs last year, taking home £16.85m and £13.61m respectively.

“This may reflect an emerging trend where the largest FTSE 100 companies are following their leading US counterparts in paying their executives increasingly large sums, while smaller FTSE 100 companies continue to pay relatively low amounts.” modest”, the report states.

CEO pay consists of several different components, such as base salary, bonus, and long-term incentives.

The transatlantic rivalry

There are prominent examples of UK and US companies operating in the same industry bringing in similar revenues but with bosses paid vastly different amounts. Take Wael Sawan, the London-based CEO of Shell, who earned 7.9 million pounds ($10 million) in 2023, while Exxon Mobil’s Darren Woods earned $37 million.

The divergence is evident in the data, as FTSE 100 CEO pay continues to lag behind its S&P 500 peers. Average pay for the top 500 listed US companies was $16.3 million in 2023, up from 12.6% on a year ago and three times higher than in the UK, Equilar figures revealed in June.

The US has increasingly shifted to offering compensation in the form of stock awards that remain contingent on company performance and place less emphasis on one-time bonuses.

With S&P 500 companies consistently outperforming the FTSE 100 in terms of revenue and market capitalization, this results in a rapidly widening gap that the UK will have to close.

Certainly, many FTSE 100 companies have global operations and the ranking does not include some major UK employers due to private ownership or overseas listings.

A bigger pay rise in the future?

CEO pay can be a controversial topic. While it’s generally optimistic that CEOs will see their pay rise, the percentage increase is still well behind the 16 percent increase seen last year, as well as what corporate America is paying its leaders.

Advocates for better pay among top management, such as the LSE’s Hoggett, argue that unless pay for UK bosses starts to match US peers, attracting experts and industry veterans will be more difficult. That, in turn, will affect “the ability to create globally significant companies,” she said in a podcast last year.

Recently, the topic of CEO compensation has caused company stakeholders to debate whether or not it is excessive. In 2023, a majority of Unilever shareholders rejected the compensation package of CEO Hein Schumacher, who was about to take over the leadership of the consumer company.

Earlier this year, a major AstraZeneca investor said Soriot was “massively underpaid” given his contributions to the British pharmaceutical giant, despite being among the highest-paid European executives in the industry.

The High Pay Center report identifies a widening gap between the salaries of top executives, which is currently 120 times higher than the average salary. This is for various reasons, including the weaker role of unions and the “cult of the superstar CEO”.

This creates further tensions “as excessive spending on top earners by top firms makes it harder to fund pay rises for the wider UK workforce”, the think tank said.

The battle between the two forces could determine the future of Britain’s chief executives and workers. One thing is certain: Britain still has a serious recovery ahead of it if it hopes to compete with Wall Street.

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