Three quarters of the BEL20 companies pay their CEO less than in 2007

New results from European research into executive remuneration in 669 listed companies

Across all listed companies, total CEO remuneration has increased by an average of 23% over the last eight years (2007-2014) in Belgium. The figure is even higher in Germany (32%). In France and the Netherlands, the increase was only 11%. There are major differences depending on the stock market index, however (BEL20, Bel mid, Bel small). As for the composition of the package, it appears that share-related remuneration is falling out of favour. Whereas 45% of businesses sampled still used this form of remuneration in 2007, it had fallen to a mere 23% by 2014. It also appears that variable remuneration is mainly determined by short-term financial benchmarks. Finally, Belgium scores relatively well in comparison to other countries in terms of diversity, especially with respect to the nationality and gender of the CEO.

These are the most important conclusions drawn from the annual research into top salaries by Professor Xavier Baeten of the Executive Remuneration Research Centre at Vlerick Business School. The 2014 sample consists of 669 listed companies in Belgium, France, the Netherlands, Germany and the United Kingdom. Specific attention is paid to evolution over the last eight years, pension allowances, the factors that determined variable remuneration and the impact of the nationality and gender of the CEO.

CEO remuneration levels: major differences between them and the dominant impact of company size

Across businesses of all sizes, CEOs in the United Kingdom earn the most (4,050,000 euros), followed by Germany (2,045,000 euros) and the Netherlands (1,065,000 euros). Belgium and France bring up the rear, with 670,000 and 495,000 euros respectively. This is a median of the total remuneration, including fixed pay, variable pay and share-related pay. A CEO in a large listed company earns nearly ten times as much as a CEO in a small listed company.

The total remuneration has dropped in 75% of the BEL20 companies over the last eight years. That figure is clearly higher than for the large listed companies in France (46%), Germany (33%) and the Netherlands (33%). The drop in Belgium has mainly been caused by the reduction in the bonus. In the small listed companies (Bel Small), however, remuneration has increased in almost all companies (89%). Whereas the drop in BEL20 companies amounted to an average of 16%, there was an increase of 45% in the Bel Small companies. In comparison: between 2007 and 2013, average salaries in Belgium rose by 17%.

If the remuneration of the CEO is compared to that of the CFO, it appears that the CEO earns between one and a half times and 1.7 times as much as the CFO, depending on the country.

Share-related remuneration falling out of favour and financial indicators clearly the most important factor determining variable remuneration

If we turn our attention to the composition of the remuneration package, we could describe Belgium as the most risk-averse country, in the sense that fixed pay always constitutes a higher proportion of total remuneration than in the other countries. In the BEL20, 52% of the package is fixed (48% variable), in the Bel Mid this figure is 58% and in the Bel Small it is 77%. In all the countries, the proportion of variable remuneration has fallen.
As Xavier Baeten explains, “This is a trend that was already predicted years ago: legislation has imposed a large number of obligations in terms of how variable remuneration is constituted. This has led to a shift towards fixed remuneration”.

Although there is more and more insight into the fact that the bonus needs to be determined on the basis of a mixture of financial and non-financial performance indicators, it is striking that 96% of businesses use accounting factors (profitability), whereas only 21% also pay attention to the employees (satisfaction) and only 10% to customer-related factors.
Xavier Baeten adds, “In the context of the recent climate conference in Paris, it is striking that hardly 1 company in 10 also includes environment-related factors in its determination of the bonus. This is despite the fact that companies have a role to play here that is far from negligible”.

It is also striking that share-related pay is falling sharply out of favour. Whereas almost half (45%) of listed companies provided for this form of remuneration in 2007, this has dropped to 23%. The decrease is most pronounced in France. Belgium is atypical in this sense, since share options are clearly the most popular form of share-related remuneration, which is not the case in the other countries.

Diversity: Belgium scores well, but in the land of the blind the one-eyed man is king.

This year, the researchers looked specifically for links between the demographic characteristics of the CEO and his or her remuneration. First and foremost, it is striking that only 3% of companies have a female CEO. Belgium is clearly better than average at 8%, whereas Germany has the worst score: it does not have a single female CEO. Belgium also scores well for nationality, with 35% of CEOs being foreign. Only the United Kingdom does better (44%).
Xavier Baeten points out that “In contrast to what many people expect, we did not find any link between gender and remuneration level. However, this is largely caused by the fact that there were so few female CEOs. It was also striking that foreign CEOs were paid significantly more”.

In comparison to other research on CEO rewards, this study has unique added value. Firstly, the analysis covers several European countries. Secondly, the remuneration of all listed companies was examined, whereas other studies tend to limit themselves to the very largest businesses. Thirdly, the database was fed each year, enabling the analysis of evolutions over a longer period. And finally, attention was not only paid to salary levels, but also to the constitution of remuneration packages.

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