- Compensation for CEOs in leading European companies has risen by approximately three percent, but remains below the peak value of 2015
- By contrast, pay for Supervisory Board members and chairpersons is again in marginal decline
- Switzerland a pay paradise for CEOs and chairpersons
- hkp/// group analysis of ‘Executive and Non-Executive Director Compensation in Europe 2017’
Frankfurt, June 22nd, 2018. Compensation for CEOs and chairpersons of Europe’s leading (STOXX) listed companies increased by 2.7% in 2017 to stand at an average of €6.0 million. The increase was mainly due to a sharp 21.9% rise in variable compensation for top managers over several years based on consistently strong company earnings. In 2017, the net income of STOXX companies again expanded by 57.2%. By country, the highest pay for CEOs – as in previous years – was reported in Switzerland, followed by Germany and the UK. In terms of sectors, the highest levels of direct remuneration were paid in the consumer goods and healthcare industries. Following the collapse of the last economic and financial crisis, compensation in the finance industry has revived.
In contrast to the pay of CEOs, compensation for the chairs of supervisory boards and governing boards has been in decline since 2011: between business years 2016 and 2017, average total remuneration for these groups fell 10% to €0.79 million. In this area too, companies in Switzerland head the European rankings by some distance; they also lead the world.
These are the findings of an analysis undertaken by the consultants hkp/// group entitled “Executive and Non-Executive Director Compensation in Europe 2017”. The assessment is based on figures for the compensation of senior managers published in current annual reports of companies in the STOXX® Europe 50 and EURO STOXX 50® stock market indices.
“While we are seeing moderate pay increases for European CEOs that fall far below corporate profit figures, the trend towards lower earnings continues for supervisory board members and chairpersons. This is remarkable as operating on equal terms should mean reward on equal terms, and there is still no sign of this,” says hkp/// group Managing Partner Michael H. Kramarsch.
CEO pay in a class of its own in the USA
According to the hkp/// group analysis, the average direct compensation for chairpersons and CEOs of STOXX companies (excluding company pension schemes and fringe benefits) is approximately €6.0 million. The highest value for 2017, as in 2016, was approximately €13.0 million for the CEO of Roche, followed by the CEOs of Anheuser-Busch and UBS (€12.5 million each). SAP, which has the highest earnings figures in Germany, came fourth in the pay rankings with around €10.9 million. Among STOXX companies, Orange and Glencore had the lowest pay for CEOs (€1.7 million and €1.3 million respectively), with the CEO of Glencore voluntarily foregoing variable compensation in 2017.
The remuneration charts in the USA (Dow Jones Industrial businesses) are topped by Walt Disney, whose CEO earned approximately €28.0 million in 2017. Apple, the company with the lowest CEO compensation in this group, pays its CEO around €8.0 million. The average value of CEO direct compensation in the Dow Jones Industrial Average stands at approximately €15.1 million, roughly two-and-a-half times the European average and well above the top European value.
Fig. 1: Top 10 highest paid CEOs/chairpersons in Europe for 2017, values in T€
Supervisory Board compensation: Swiss companies the undisputed leaders
As in previous years, supervisory and governing board chairs of European companies based in Switzerland topped the pay scales: UBS paid €5.1 million, Roche €4.1 million, Novartis €3.4 million and Zurich Insurance €1.4 million. These figures comfortably exceed the average STOXX value of €0.79 million, which rose by a marginal 10% on 2016. The highest German representative in the rankings for 2017 was Deutsche Bank at number 17 (remuneration of €0.8 million).
Fig. 2: Top 10 highest paid supervisory board and governing board chairpersons in Europe for 2017, values in T€
The leading position of Swiss companies is often explained by the legally defined responsibility and interpretation of the role of governing board president as a full-time position. However, hkp/// group Managing Partner Michael H. Kramarsch believes this only partly explains earnings figures that are consistently well above the European average: “While Switzerland has a tradition of high earnings for governing board members, the usual arguments alone cannot account for its dimensions. Those who serve on supervisory boards of leading companies in Germany, the United Kingdom and France commit just as much time to their roles, plus the levels of responsibility and liability have risen significantly. Involvement in key strategic decisions is therefore more than comparable with the Swiss model. Switzerland is just a pay paradise for governing board members,” says the expert in corporate governance.
Background information on the analysis
The hkp/// analysis of ‘Executive and Non-Executive Director Compensation in Europe 2017’ examined the pay of senior managers of 73 companies in 11 countries which are listed on the STOXX® Europe 50 and EURO STOXX 50®, Europe’s main share indices. The analysis was based on data taken from annual reports drawn up for the end of 2017 and the previous business year.
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