Germany overtakes UK for executive pay levels

Germany now has the highest-paid corporate executives in Europe, according to a new study.

The research from Belgium's Vlerick Business School found that German executive salaries overtook those in the UK for the first time in 2013, partly as a result of the adoption of long-term pay incentives in German companies, and partly due to increased constraints on top salaries in the UK as a result of public and shareholder pressure.

According to the study, median executive pay among the biggest German companies was €3.4 million in 2013. However, British executives remain the best paid among smaller businesses that have assets of €1 billion to €5 billion.

Meanwhile, a separate study of executive pay by the Canadian Centre for Policy Alternatives has found evidence of increasing income inequality, with the best-paid chief executives’ pay increasing at twice that of the average worker over the period from 2008 to 2013.

IZA World of Labor recently published an article by Priscila Ferreira on the effect of market competition on executive compensation. She writes that “while most shocks or policy reforms that foster competition tend to strengthen the link between competition and performance-related pay, it can also be the case that increasing competition reduces incentives.”

Elsewhere, our author Michael L. Bognanno has written about the increase in CEO salaries in recent years relative to worker salaries. He argues that “measures that enhance the transparency of compensation packages, strengthen the shareholder voice on pay issues, and limit the CEO’s freedom to exercise stock options might help move CEO pay toward just levels.”

Read more here.

Related articles:
Market compensation and executive pay, by Priscila Ferreira
Efficient markets, managerial power, and CEO compensation, by Michael L. Bognanno