The metaphoric tug-of-war between the U.S. and the U.K. has heated up in recent years with British companies moving across the Atlantic to list publicly. A related hurdle has been with luring executive talent as London’s pay standards are far lower in comparison to some parts of the world, such as New York.
London Stock Exchange's CEO has been vocal about the need to up the U.K.’s pay packages for executives if it hopes to compete with global players. In an interview for Bloomberg’s In the City podcast, LSE’s Julia Hoggett emphasized the challenges that lower executive pay standards pose.
“We’ve hamstrung ourselves from creating a level playing field with which to compete with the rest of the world,” she said in a podcast episode published Wednesday.
“We want the U.K. to create globally consequential companies,” Hoggett said, adding that markets in Asia, America and some parts of Europe offer potentially “game changing” experts much higher pay, forcing the U.K. to offer them salaries. that are even higher than what the CEO is paid in order to bring them on board.
“We’ve got to have a conscious understanding of the potential impact that it [executive pay] has on the ability to create globally consequential companies.”
Between 2015 and 2021, the median pay for New York’s S&P 500 corporate chiefs increased 34% while for London-based index FTSE 100 CEOs, that figure declined 13%, according to a Wall Street Journal report from April. The stark difference in top executives' compensation supports Hoggett’s argument, while hinting at the widening gap between the U.K. and elsewhere in terms of pay.
“The U.K. has gradually, over the last 20-30 years, stopped investing in itself,” Hoggett said in the podcast, emphasizing that sometimes the country has fallen short on how it directs capital to bolster growth.
Hoggett made similar remarks before in a blog post where she called for expanding the pay package for top executives in Britain.
“We should be encouraging and supporting UK companies to compete for talent on a global basis, so we remain an attractive place for companies to base themselves, stay and grow,” Hoggett wrote in a blog post in May. “The alternative is we continue standing idly by as our biggest exports become skills, talent, tax revenue and the companies that generate it.”
The blow from Arm’s overseas listing
The LSE CEO's most recent comments come just weeks after the IPO of British chipmaker Arm, which listed on America's tech-heavy Nasdaq index amid great fanfare. The listing, valued at $55 billion, marked a huge blow to London, as Arm was initially listed on the London Stock Exchange and Nasdaq until 2016, when SoftBank bought the business for $32 billion.
During her podcast interview, Hoggett weighed in on what Arm’s choice of listing in the U.S. meant for the U.K., where the company still has its headquarters, calling it a “big” blow.
“We should fight for every company that we believe we can provide great financing to, and particularly, great homegrown U.K. companies that [are] world leaders in what they do,” said Hoggett. “There are a host of reasons why Arm went to the U.S.—I fervently believe that there’s still the potential for them to come to the U.K. as well.”
Other companies, including British plumbing equipment company Ferguson, have taken the path to list in the U.S. For companies making the move, reasons have been wide-ranging, including to capitalize on larger markets in America and access to more liquidity.
London is still a land of great promise
Despite the shortcomings in London, the city and its markets still offer an opportunity like no other, Hoggett pointed out.
“London is the only European venue that’s in the top 10 of global exchanges,” she said. “By any measure, we’re the largest market in Europe.”
She highlighted how companies all over the world are pouring in more money into the U.K.’s private companies, but British markets haven’t “focused on what’s actually been under our noses.” Another factor that Hoggett pointed out is the need for more pension assets in the country to be channeled into equity and risk capital, where great value can be made.
“We need to have a mindset of investing across the private to public space in the U.K. to back those great companies that we are actually creating rapidly but then, we’re financing from capital overseas,” Hoggett said.
For its part, U.K. regulators are mulling an overhaul to the rules governing stock listings, easing the strictures in a way that could attract more companies to the financial hub. More recently, British pension providers moved to invest more into growth companies.
Representatives of LSEG declined Fortune’s request to comment further.
