UK companies could face an exodus of talented executives to the United States if they do not increase top-level pay, one of the UK’s biggest asset management firms has said.
Schroders, which oversees about £760 billion of assets, analysed the pay packages of 2,353 chief executives in Britain and the US and found that, on average, UK bosses were paid one-fifth of the money earned by their US peers.
Adjusting for the size of companies, US chief executives in the US were paid more than twice that of their UK counterparts, Schroders claimed.
Executive pay
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Schroders head of active ownership said this disparity in executive pay could drive top talent across the Atlantic.
Writing for The Times, Kimberley Lewis said: “The size and dynamism of many US sectors is likely to attract talent at all levels of an organisation, offering opportunities to lead larger companies, take on more challenging roles and work within global enterprise clusters such as Silicon Valley.”
“Add to that the pay differential and we think there is a risk high-performing chief executives and other bosses could be tempted away.”
Addressing complaints about excessive CEO pay, she said that a balance needs to be struck and that investors wanted to see a strong link between shareholder returns and CEO pay.
“But we also believe that in many cases, especially where the firm is global or operating in a highly competitive global sector, there is a case to pay more to achieve global alignment,” she said.
Last month, US-based governance adviser ISS Corporate found that in 2023 median chief executive pay at S&P 500 companies rose by 12% – its fastest rate for 14 years.
However, in March, more than 20 social scientists warned the UK’s biggest investment companies that allowing US-style executive pay packages could “create a significant risk of higher inequality” and “much worse lower levels of happiness, health and wellbeing across society”.
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