Remuneration of top managers in Europe stable in the past five years

Results of a European survey into the remuneration of top managers at listed companies

In 49% of all companies the total remuneration (i.e. fixed salary, bonus and share-related remunerations) of CEOs in Belgium, France, Germany and the Netherlands increased between 2007 and 2011. However, in 49% of cases the total remuneration dropped, mainly due to a decrease in the variable remuneration. In Belgium the median CEO remuneration even decreased, but the number of major increases equalled the number of major decreases. Finally, the composition of the remuneration packages changed. The weight of the fixed salary increased and that of the performance-related share decreased. These are the main conclusions of the annual survey into the remuneration of top managers carried out by the Executive Remuneration Research Centre of Vlerick Business School.

Remarkably the study shows that in 2011 a link was found between the performance of the company and the remuneration of its CEO. In 2007 that was not the case. According to Professor Xavier Baeten this can be attributed to several environmental factors:

Presumably the increased – and in most countries mandatory – transparency about the CEO’s remuneration has encouraged shareholders, and mainly directors, to take a closer look at the top management’s remuneration packages. The appointment of a remuneration committee (which is mandatory in Belgium for listed companies) is a good example of this and has clearly had an effect. Moreover, in the past few years there have been quite a few regulatory initiatives which have had a positive influence. That said, self-regulation is not unusual. In this view there is no need for further legal provisions, because they deprive companies of the freedom to strategically reward staff. However, we have noticed that a company’s performance and size are the main factors in determining the CEO’s remuneration.”

Other interesting findings:

  • In Belgium the median remuneration of CEOs in the past 5 years has decreased by 12%, while the remuneration of employees has increased by 17% (based on data provided by Hudson for the average employee, from junior staff to senior management). Nevertheless, there are vast differences, meaning there are both steep increases and decreases. The main explanation for this lies in the evolution of company sizes and performance.
  • In France the (median) remuneration has remained unchanged, in Germany it has increased by 12%, and in the Netherlands it has increased by 4%.
  • The median remuneration of a CEO of a Bel 20-listed company is 2,010,000 euro, of a Bel Mid-listed company 635,000 euro and of a Bel Small-listed company 460,000 euro.
  • The United Kingdom is the odd one out, because remuneration there is clearly higher, mainly because CEOs receive more shares. In fact, half of their remuneration package consists of shares, whereas in Belgium it is only 16%.
  • Generally CEOs earn twice as much as CFOs.
  • The most successful companies tend to use more non-financial indicators to determine the variable remuneration (mainly customer- and staff-related criteria). Moreover, these companies spread out bonus payments and award shares (subject to performance-related criteria).

The uniquesness of this research explained

Compared to other studies into CEO remuneration, this study boasts a unique added value for various reasons. Firstly, several European countries are analysed, allowing for comparisons to be made between the Anglo-Saxon business model and the Continental European one. Secondly, this study focuses on remunerations in all listed companies, whereas other studies tend to focus on the largest businesses only. And thirdly, the database is updated every year, which allows for the analysis of evolutions over longer periods of time.

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