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New York City and London have long been two of the world’s top financial centers. But executives based in the States tend to fare a bit better than those across the pond.
When a company is headquartered in the U.S., CEOs can earn more than three times what their counterparts might make in the U.K., The Wall Street Journal reported on Wednesday. In 2021, for example, the average CEO at an S&P 500 company made $14.5 million, while a CEO at a British FTSE 100 company made just $4.5 million.
“If you know you can earn in the U.S. a multiple of what you can earn in the U.K. for doing a similar job, and without all the opprobrium that often gets heaped on executives by investors in the U.K., then naturally that becomes a draw factor,” the lawyer Oliver Lazenby told the WSJ.
The pay gap is due to a few different factors: While CEOs in both countries earn about the same in salaries and bonuses, those in the U.S. get more in stock awards. American-based leaders typically receive both guaranteed and performance-based awards, while those in U.K. get just the latter. Additionally, shareholders in Britain have to approve compensation packages. In the States, companies must disclose those packages but they don’t have to get the okay on them from shareholders. And generally, Americans are more tolerant than Brits of high pay for executives.
In recent years, thanks to increased corporate profits and a strong stock market in the United States, the disparity between pay on both sides of the Atlantic has risen. While the average compensation for S&P 500 CEOs rose 34 percent from 2015 to 2021, it fell 13 percent for FTSE 100 CEOs. “There’s always been a gap,” said Mitul Shah, the head of the executive-compensation advisory unit at Deloitte. “The gap is getting bigger.”
In response to this trend, some British companies are relocating to the U.S. and listing on the New York Stock Exchange. Lazenby noted that this may contribute to a broader “talent drain” away from England, as compensation in the U.S. becomes more attractive to white-collar workers. That’s led British officials to consider easing regulations to make the U.K. more appealing to companies and their high-earning CEOs.
Until the two countries reach something more like parity, though, $14 mil sounds much nicer than $4 mil.
