UK is home to half of the ten highest paid CEOs in Europe

UK chief executive pay increased 25 per cent between 2013 and 2014

The findings draw attention to yet another widening gap between top earners and the average UK worker (Monkey Business Images/REX Shutterstock)

Five out of the ten highest paid chief executives across the major European countries are based in the UK, according to a new study.

Britain’s CEOs are paid a total of €5.65 million each year, ahead of €4.26 million in Germany, €3.15 million France, and €2.91 million the Netherlands.

UK chief executive pay increased 25 per cent between 2013 and 2014, according to the report by the Vlerick Business School’s Executive Remuneration Centre.

For Professor Xavier Baeten, expert in reward management, the research shows that we should still question the amount CEOs get paid.

“UK has regained the top spot from Germany confirming the fact that the Anglo-Saxon corporate governance model, which is characterised by more dispersed share ownership, provides CEOs with more power in relation to the board, and leads to higher compensation levels,” he said.

Germany’s chief executives had the highest levels of fixed salaries at €1.32 million followed by Netherlands bosses at €1.15 million yearly.

In comparison, Britain’s CEOs have a higher proportion of their pay based on performance with 74 per cent of their total compensation coming from both long term incentives (such as shares) and short term incentives (such as annual cash bonuses).

Share-based remuneration is becoming less popular with European bosses. While 45 per cent of firms in continental Europe were granting share-based remuneration in 2007, this has decreased to 23 per in 2014. In the UK, share-based remuneration has decreased too. Over 86 per cent of firms offered shares as pay in 2013, but this dropped to 75 per cent in 2014.

“While 98 per cent of companies use financial KPIs - key performer indicator - based on such things such (operating) profit and share performance, under half incentivise bosses using non-financial indicators such as how well they treat their employees, customer satisfaction, environmental performance and the like,” Professor Baeten said.

The findings draw attention to yet another widening gap between top earners and the average UK worker.

Calculations from the High Pay Centre think tank suggested that by January 5, Britain’s top bosses had earned more than the average UK worker gets in an entire year.

FTSE 100 bosses received average total remuneration, including share options, of £4.96m in 2014, according to estimates from the proxy shareholder voting agency Manifest. This equates to a rate of around £1,200 an hour.

A recent research by the Chartered Institute of Personnel and Development (CIPD) found nearly 60 per cent of employees say the high level of CEO pay demotivates them to work.

A further 71 per cent believe that CEO pay in the UK is too high or far too high. Almost half of employees felt their own chief executive was paid too much.