Senior-level reward in US dwarfs payments in large European countries

Senior directors in North America earn £11.9m a year, on average, putting the country top of the global high pay rankings, a study has revealed.

The UK and Germany came second in the high-pay league with median remuneration of £5.4 million in both countries.

The findings, outlined in the report Global Executive Compensation 2015: Survey of FT Global 200 companies, prompted researchers at E-reward.co.uk to question whether the UK should raise executive pay to stay competitive. 

However, the High Pay Centre (HPC), an independent think tank, has instead urged remuneration committees to be "tougher and braver" in their decisions. 

The countries paying the least were Japan and China, where the median pay for executives was just over £0.5m. 

The survey was based on data gathered from across 25 countries in the world's largest 200 companies, including Apple, Facebook and Google in the US, and firms including BMW, Samsung, Honda and HSBC from other countries. 

Steve Glenn, E-reward’s head of executive remuneration, said: "Pay levels in Europe and elsewhere have not reached anywhere near the magnitude of those found in the US but some in business communities outside North America argue there are grounds for comparisons to be made due to the global market for top talent. On the other hand, calls for boardroom pay restraint continue to intensify meaning companies wishing to match or even move towards US levels face some tough choices."

Stefan Stern, director at the HPC, said it was a "self-serving argument" to increase executive pay in line with the US, as it benefits those involved in the "systematic problem of high pay in this country", including those achieving high remuneration, advisers and head hunters. 

"People talk about the so-called global market for CEOs but it is just not true. The majority of CEOs come from within the organisation and there isn't this great transatlantic flow of CEOs hopping around the world. It is not clear that salaries have to be truly internationally competitive as you are not really in competition," he added. 

Charles Cotton, reward adviser at the CIPD, added: "You could argue that we are out of kilter with North America but you could also say that we are out of kilter with Japan and China who are paying their executives a lot less. What is important is what value the executives are actually bringing to the organisation - are investors getting a return on investment and are we rewarding the right behaviours in the right way?"

Stern said remuneration committees and CEOs needed to use restraint and set a better example. He added that the question for leaders was whether they wanted to earn as much as possible, or whether they were thinking about the long-term future of the business. 

"You ought to be concerned if your pay is so wildly out of line with what ordinary people at the business are getting because it could be severely demotivating to people," he added. 

CIPD research, The view from below: What employees really think about their CEO's pay packet, highlighted that bosses are now pocketing an average of 183 times that of the lowest paid worker in their organisation.  

The survey found 71 per cent believe CEO pay is either 'too' or 'far too' high, with 59 per cent reporting that it directly demotivates them. 

Cotton said businesses should look at what it means for the rest of the workforce if they do not feel they are being treated fairly compared to the CEO and whether it would have a negative impact on whether they chose to stay or perform. 

The E-reward survey also found the median salary rate for principal directors in the top 200 global companies was just £968,647. 

It found the highest bonuses were generally paid by US companies, except in the instance of the group managing director of Hong Kong-based Hutchinson Whampoa, who is reported to have received a bonus worth £15 million.

Next in the list were the chairman and CEOs of Walt Disney, Time Warner and Boeing, reportedly claiming bonuses worth about £14 million, £9.3 million and £9.28 million respectively.