41% of CEOs earned less in 2022

These are just some of the findings from the annual study of CEO remuneration in Belgian and European listed companies, conducted by the Executive Remuneration Research Centre at Vlerick Business School. This study, based on 2022's remuneration reports, was conducted by Professor Xavier Baeten and Senior Researcher Marthe Van Hove. The specific focus of this year’s study, besides the level and composition of remuneration packages, was the underlying performance indicators and complexity of remuneration systems.

Evolution of top salaries in Belgium

The study provides an annual overview of key remuneration data as well as its evolution. For example, the median total remuneration (including fixed salary, bonus and long-term remuneration) for Belgian listed companies in 2022 stood at €873,609, down from €919,559 the previous year. For the Bel 20 companies this stood at €2,701,216, with Bel Mid and Bel Small companies at €868,303 and €579,692, respectively. This puts Belgium well down in the international rankings. Within the Stoxx 600 index, which includes the largest companies in both the European Union and the United Kingdom, (median) CEO remuneration is €4,787,522 for Germany and €4,107,968 for the United Kingdom.

Xavier Baeten, Professor of Reward & Sustainability at Vlerick Business School: “These median figures do not tell us the full story, as they only reflect the mean perception (i.e. of the company in the middle) when ranking the figures from high to low. Therefore, we carried out two more analyses. Firstly, we looked at how many CEOs experienced an increase or decrease in terms of their remuneration. Within the Bel 20, 42% experienced a decrease, with this figure at 34% and 50% for Bel Mid and Bel Small companies, respectively. This immediately tells us that remuneration is not constantly on the rise. We then also found a significant correlation with company profitability. Secondly, we accounted for the fact that we're talking about a wide range here. For Bel 20 companies, for example, the first quartile – where it was observed that a quarter of CEOs earned less – stood at €1,376,985, while the third quartile stood at €5,330,778. That means the total remuneration for half of CEOs among Bel 20 companies is within a range of roughly between €1.4 and €5.3 million.”

Financial performance indicators remain dominant

This year, the study paid particular attention to the performance measures used to determine short-term bonuses in listed Belgian companies. At the top of the list, we find financial indicators. More specifically, we are talking turnover figures (used by 52% of companies), cash flow (39%) and various profitability measures. Environmental indicators are on the up, but are still used less than, for example, employee engagement (17%) or customer engagement (12%). In reality, only 6% of companies incorporated any form of emissions-related performance measure, with the same applying to measures on energy usage and consumption of other resources.

Xavier Baeten: “While it makes sense that the list should be dominated by financial indicators, it should also be noted that environmental indicators continue to lag behind – a somewhat painful observation to make in the run-up to the COP 28 United Nations climate conference. We also found that Belgian companies are reluctant to be more transparent when it comes to their chosen performance indicators. Many companies are continuing to employ deliberately vague terminology in their remuneration reports, often without setting concrete benchmarks.”

Significant increase in the complexity of remuneration systems

This year's study also sought to identify the degree of complexity of remuneration systems. To that end, the researchers drew on existing scientifically validated measures, and subjected these to rigorous field testing. To determine the level of complexity, factors taken into account included the number of instruments employed in determining remuneration levels, whether bonus payments were spread out over time, and some of the characteristics of the performance indicators used for variable remuneration.

Marthe Van Hove, Senior Researcher at Vlerick Business School: “We note that CEO remuneration has significantly increased in complexity over the years, albeit with a slight decrease during the pandemic. Moreover, we find that the degree of complexity is higher in companies who pay their CEOs more than average, and where a higher proportion of remuneration is awarded in the form of variable remuneration. We also observe higher complexity in companies where board members have served on the board for a shorter period of time and there are a higher number of directors. However, the most striking finding is the negative correlation between complexity and company performance. This means that, the more complex the remuneration system, the more negative the impact on company performance in the long run. As such, companies have every incentive to keep their remuneration systems simple.”