Belgium lagging behind with inclusion of environmental criteria in CEO bonuses

Results of Vlerick’s annual study of CEO remuneration

Xavier Baeten

By Xavier Baeten

Professor of Reward & Sustainability

Marthe Van Hove

By Marthe Van Hove

Researcher, Governance

04 December 2024

In 2023, the total median remuneration of the CEOs of large and medium listed companies in Belgium rose; for smaller companies, it fell slightly. The biggest discrepancies are in long-term remuneration and pension contribution. These amounts are ten times higher at large listed companies than at the smaller ones. The most striking result of the research, however, is how far Belgium is lagging behind when it comes to including sustainability criteria (ESG) in short-term bonuses. 

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These are some of the findings of the annual study of the remuneration of CEOs of listed companies by the Executive Remuneration Research Centre at Vlerick Business School. The research was conducted by Professor Xavier Baeten and senior researcher Marthe Van Hove, on the remuneration reports for 2023. This year, the focus lay on developing a classification system for specific sustainability criteria (ESG) in short-term bonuses.

CEO salaries in Belgium: big differences depending on the stock markets

The study provides an annual overview of key remuneration data and their progress. The median total remuneration (including fixed salary, short-term bonus and long-term remuneration) was €2,810,634 for Bel 20 companies, €1,061,653 for Bel Mid companies and €545,705 for Bel Small companies. For 2022, these figures were €2,701,215, €868,303, and €579,692 respectively.

The differences are chiefly in long-term remuneration (often in the form of shares) and pension contributions. Whereas 75% of the CEOs of Bel 20 companies receive this form of remuneration, only 16% of Bel Small CEOs do so. But the amount varies greatly as well: the median of the long-term remuneration comes to €1,435,415 for Bel 20 companies, €378,891 for Bel Mid companies and €146,250 for Bel Small companies.

For 2023, data was also included on the amount that the company contributes to the CEO’s pension. The majority of companies do pay a pension contribution, but the amounts vary greatly: at Bel 20 companies, the median contribution is €179,980, compared to €96,095 for Bel Mid and €16,300 for Bel Small.

The composition of the pay packages is therefore clearly different as well. Whereas the fixed salary of a CEO of a Bel 20 company constitutes a 34% share of the total remuneration, that figure is 68% for Bel Mid and as much as 77% for Bel Small. Correspondingly, the long-term remuneration constitutes almost half (45%) of the pay package in Bel 20, but this falls to 27% in Bel Mid and 9% in Bel Small.

International comparison

In an international comparison based on the Stoxx 600 index (the 600 largest European listed companies, including 18 Belgian companies), it is striking that the Belgian companies are comparable in size to companies from the United Kingdom. The median total remuneration differs, however: for the Belgian companies included in that index, the median is €3,066,938, and for the UK, it is €4,560,409. French CEOs have a median of €4,380,745, German €4,362,393, Dutch €3,702,265, and Swiss €3,354,540. Sweden brings up the rear with €1,575,052.

Belgium lagging far behind for inclusion of sustainability criteria in short-term incentives

A unique feature of this year’s research is the focus on sustainability criteria (ESG criteria). These may be environmental factors, social aspects or issues linked to good governance. In 2023, 59% of Belgian listed companies included one or more of these criteria in their system for determining the short-term bonus. That is a clear increase from five years ago, when 46% of companies did so.

If these criteria are split up into the individual ESG dimensions, we see that 13% of Belgian listed companies include environmental indicators, 30% include social indicators, and 23% include criteria for good governance. If we go a level deeper still, we find that the most popular criteria have to do with customer focus (19%; e.g. the net promoter score, customer satisfaction), employee satisfaction (13%), and diversity at top management level (11%).

Xavier Baeten, Professor of Reward & Sustainability at Vlerick Business School, comments: “Sustainability is and remains a significant challenge and focal point. What is unique about our approach is that we have provided a very detailed map of the sustainability indicators, which is in line with the structure provided by the European Commission in the context of the new ESG reporting rules. When we look at the results – and compare the Belgian listed companies with the 600 biggest listed companies in Europe – we see that Belgium is really lagging behind. Whereas 33% of European companies include emissions (or rather, the reduction of emissions) in the bonus calculation, this figure is a mere 8% in Belgium. Likewise, only 6% of the Belgian companies include developing an environmental strategy in the bonus calculation, as opposed to 26% of European companies. There is clearly work to be done here, because companies need to be aware that they will have to provide information on the integration of sustainability achievements into incentive systems (variable pay) in their annual report, as a result of the European Commission’s new reporting rules (Corporate Sustainability Reporting Directive). Incidentally, this obligation does not only apply to listed companies: medium-sized businesses will also come under the new rules.”

Solvay and UCB setting a good example

Analysis of the annual reports resulted in two interesting examples of Belgian companies that are serious about including sustainability criteria in the short-term bonus.

  • At Solvay, 15% of the bonus is determined by progress with the company’s sustainability strategy (‘One Planet Progress’). There is a focus on reduction of emissions, the proportion of sustainable solutions/products, limiting water consumption, waste management, accidents at work and diversity.
  • For its part, UCB focuses on the value created for patients, employees and the planet. This includes access to medicines, an ethical mindset, inclusivity, employee health, emissions, use of raw materials, and so on.

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Xavier Baeten

Xavier Baeten

Professor in Reward & Sustainability