Whether FTSE 100 CEOs are compensated enough, especially relative to their transatlantic peers, has been an ongoing debate in the U.K. for several years.
The London Stock Exchange’s CEO Julia Hoggett has weighed in on this, as have individual CEOs and advocacies, with some arguing CEO compensation needs to increase while others believe it’s already more than adequate compared to the average employee.
In a new development, the median pay of CEOs at Britain’s 100 biggest companies just climbed 2% to hit a record high of £4.2 million ($5.4 million) in 2023 and more executives are being paid over £10 million than ever before, according to a report by the High Pay Centre published Monday.
Economic trends have favored the top City bosses, including a bounce-back 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 £16.85 million and £13.61 million, respectively.
“This may reflect an emerging trend where the largest FTSE 100 companies follow the lead US counterparts in paying their CEOs ever higher amounts, while smaller FTSE 100 companies continue to pay comparatively ‘modest’ sums,” the report said.
CEO pay consists of a few different components, such as base salary, bonus and long-term incentives.
Transatlantic rivalry
There are prominent examples of companies in the U.K. and U.S. operating in the same industry and bringing in similar revenues, but with bosses paid vastly different amounts. Take London-based Shell CEO Wael Sawan, who made £7.9 million ($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 trail that of its S&P 500 peers. The median pay for the top 500 listed U.S. companies was $16.3 million in 2023—up 12.6% from a year ago and three times higher than the U.K., Equilar figures revealed in June.
The U.S. has increasingly turned to offering compensation in the form of stock awards, which remain contingent on company performance and put less emphasis on one-off bonuses.
As the S&P 500 companies consistently outperform FTSE 100 members in revenue and market capitalization, this results in a rapidly widening gap that the U.K. will have to bridge.
To be sure, many FTSE 100 companies have global operations and the ranking doesn't include some major U.K. employers because of private ownership or overseas listings.
A bigger pay-bump in the future?
CEO pay can be a contentious topic. While it’s generally optimistic for CEOs to see their pay swell, the percentage increase is still far behind the 16% rise seen last year as well as what U.S. companies are giving their leaders.
Those advocating for better pay among top management, such as LSE’s Hoggett, argue that if the remuneration of U.K. bosses doesn’t start to match U.S. peers, attracting experts and industry veterans will be more challenging. That, in turn, will hurt “the ability to create globally consequential companies,” she said in a podcast last year.
Recently, the subject of CEO pay has caused company stakeholders to spar over whether or not it’s excessive. In 2023, a majority of Unilever shareholders rejected the compensation package of CEO Hein Schumacher, who was about to take the consumer company’s helm.
Earlier this year, a major AstraZeneca investor said Soriot was “massively underpaid” given his contributions to the British pharma giant despite being among the best-paid European CEOs in the industry.
The High Pay Centre report identifies a growing chasm between top-boss pay, which is currently 120 times that of the average employee. This is happening due to various reasons, including the weaker role of trade unions and the “cult of the superstar CEO.”
That creates further tensions “as excessive spending on top earners by leading firms makes it harder to fund pay increases for the wider U.K. workforce,” the think tank said.
The tussle between the two forces could determine the future of CEOs and workers in Britain. Only one thing is certain: the U.K. still has some serious catching up if it hopes to compete with Wall Street.
