Monday, 26 October 2015

Executive pay slowdown across Europe

Executive pay slowdown in Europe not expected for GCC executives   

Dubai, 26 October 2015 – Towers Watson research shows that total pay for European CEOs including salary, benefits, and all incentive plan pay-outs have remained flat during 2015 with a median total pay figure of €5.4 million.

The research, “CEO pay in the Eurotop 100”, reveals that almost two thirds of CEOs did not receive a salary increase for the last financial year – up from 40% in the last survey.  In contrast, Towers Watson research across the GCC shows that senior executives can expect fixed pay increases of around 5% this year.

In Europe, median actual bonus in the last financial year was 100% of base salary - a drop from the previous year of 115%.  Although bonus opportunity for executives in this region is generally lower than Europe, Towers Watson’s last Executive Compensation Survey across the GCC found that actual bonuses paid were significantly higher than target opportunity.  In addition to a slowdown in fixed and variable pay, European CEOs also saw a decline in the annualised expected value that derive from long-term incentive plans where the value dropped from 135% of base salary to 119%.  

Richard Belfield, UK Executive Compensation Practice Leader said: “In the past year we have seen remuneration committees increasingly making use of both short- and long-term design features to improve the alignment of executive compensation packages.  The most noticeable change has been the introduction of more claw-back bonuses with many also lengthening the time executives must hold onto their shares. In addition short-term incentive plans now typically include not just profit or income metrics, but also a wider range of non-financial and individual measures.”  

Andrew Marshall, Middle East Practice Leader said: “These results show that large European companies are practising pay for performance whilst many companies in the GCC continue to struggle with implementing such a culture.  Interestingly, the requirement for CEOs to hold their shares for longer periods reflects the views of many shareholders in this region who believe that long-term pay plans should be just that, set over five years or more and not over three years as is common in Europe and North America”.   

Towers Watson reports that pay-caps, say-on-pay and greater remuneration disclosure have been introduced in a number of countries, which, it suggests, is leading to closer alignment between pay and company size by sector, rather than by country.  Richard Belfield said: “Corporate governance frameworks across Europe are becoming more similar, with the result that executive compensation is increasingly a function of the size and sector of a company and less influenced by its geographic origin.

Andrew Marshall observed “We regularly advise many of our clients that the competitive landscape for senior talent is defined by industry sector right across the GCC rather than within a specific country.  To help clients understand this regional market many clients use our GCC Executive Compensation Survey that collects and analyses data on all aspects of fixed pay, annual and longer-term incentives to help build a complete picture of competitive market practice across the GCC.