“Star Culture” Drives High US CEO Pay, Says Study

Amid unusual levels of turnover in the C-Suite as well as further down the ranks, a new study of global CEO and CFO pay by FW Cook highlights some interesting patterns for global differentiation of executive pay. The study looked at the largest 250 companies worldwide by market capitalization – about half were in the Americas and roughly a quarter each in Asia and Europe/Australia.

 Key findings include the following:

• Overall pay. The US continues to lead the global market in CEO and CFO pay, but this is driven by much higher long-term incentive pay levels. Base salaries are often lower than the global average (when adjusted for size) and total cash is typically even.
  
  
  • Median CEO total direct pay in the Americas is about $17.2 million, compared to about $6.8 million in Europe and Australia, $8 million in Hong Kong and $2.8 million in Japan.
    
    
• CEO vs CFO. The Americas show a significantly higher gap between CEO and CFO pay, driven largely by differentiation in annual and long-term incentives. The report attributes this effect to “star culture” in the US, where the CEO is more highly incentivized than his direct reports, relative to other countries.
  
  
  • In the Americas, the CFO earns 35% of what the CEO earns, while in Europe and Australia this number is 52% and in Japan it is 51%.
    
    
• Long-Term Incentive Design. LTI design differs drastically among the global top 250 companies, with options being much more prevalent in Asia (albeit the sample size is small) and restricted stock more common in the Americas – the study showed very limited use of restricted stock in Europe or Asia.  Performance awards are used very frequently in the Americas and Europe, but less so in Asia.

 The report notes that market data is particularly difficult to analyze in China and Hong Kong, as several of the largest companies there are state-owned and pay is regulated.