European Execs Make Total Comp Gains

The Hay Group survey of European companies found that total cash compensation – comprised of base salary and annual bonus – has begun to converge across continents. For example, the survey showed that in companies with sales of $35 billion, both European and US CEOs earned an average $2.4 million in total cash compensation.

However, CEOs of large US companies still have the potential for the heftiest pay packages. The expected value of long-term incentives – predominantly stock options – is more than double for US CEOs than for their European counterparts.

Below the CEO level, the picture looks different. Although the use of long-term incentives is much more comment in the US, this is offset in many cases in Europe as heads of key divisions and functions pull in higher salaries and bonuses. Even when larger long-term incentives are considered, many European executives have packages at or above US levels, the Hay Group survey found.

“The study challenges the perception that executive pay is lower in Europe than in the US,” said Doug Jensen, head of Hay Group’s US executive compensation practice, in a statement. “This perception is true for the very top jobs in the biggest companies, but pay packages at US companies drop very quickly as you move down the organization – especially if stock options continue to lose favor as a long-term incentive vehicle. By contrast, many European companies have more egalitarian cultures, and senior executives often have the same incentive opportunity as the CEO (proportionate to salary). The result is that packages often exceed those for the US equivalents.”

The study showed that there is a greater diversity of executive compensation levels and practices in Europe than in the US. Within Europe, typical base salary levels are highest in the UK, and the highest bonuses tend to be paid in Germany. Long-term incentives are greatest in large French and German companies, which pay very well – up to 30% above the European norm. The lowest packages tend to be in the Nordic countries, which are often more than 30% below the rest of the continent.

Hay Group surveyed 153 publicly traded European companies to study executive compensation practices, covering nearly 1,000 executives from 11 European countries. These results were compared against data from 63 companies of a similar size from Hay’s US Executive Compensation Survey, covering nearly 700 executive jobs.

A more detailed report can be accessed without charge on www.haygroup.com .