European Executive Pay Beats Inflation as Incentive Plans Grow

Total compensation for senior executives at Europe’s largest companies rose more than twice as fast as inflation last year, helped by cash bonuses and long-term performance plans, according to a report published today.

Pay rose 6.9 percent last year compared with the European inflation rate of 2.6 percent, Hay Group, a closely held management consultancy, said in an e-mailed statement. The median salary increase was 2.5 percent, according to data on more than 1,500 senior executives at 332 companies in 21 countries.

The proportion of companies with long-term incentive plans increased year-on-year and the value of these payments rose, Hay Group said. Organizations are being torn between the desire to keep pay down and the need to offer rewards to attract and keep talented workers, according to the statement.

Companies are “caught between a rock and a hard place,” Carl Sjostrom, a Hay Group executive, said in the statement. “As Europe’s economy recovers, and the talent market picks up, we expect to see greater discord between companies and investors -- and also between different investors with different investment goals.”

The base salaries of chief executive officers rose by a median 1.1 percent compared with almost 3 percent for chief financial officers, Hay Group said. Total cash payments to CEOs climbed by 1.5 percent, about one-third of the increase secured by CFOs. The median direct compensation for CEOs was just over 3 million euros ($4.1 million), while the figure was just above 1.5 million euros for other directors.

Before it's here, it's on the Bloomberg Terminal.