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Swiss CEOs no longer the top earners in Europe

Staff writer ▼ | November 25, 2015
CEOs of Swiss companies are no longer leading the 100 biggest companies in Europe in terms of salary and are now just behind Spain and ahead of Great Britain.
Leaders   CEO Pay in the Eurotop 100
These are the findings of the Towers Watson study CEO Pay in the Eurotop 100. In 2014 the ten Swiss companies included in the list paid their CEOs a median salary of approximately EUR 7 million, around 14% lower than the previous year. However, the amount varies significantly depending on the sector and firm size.

In 2014, the median total direct compensation within the Eurotop 100 was EUR 5.4 million, in line with the previous year. This includes the base salary, short-term variable pay paid out for 2014 and deferred variable pay, as well as long-term variable pay for 2014.

Looking at each component, median base pay increased by just under 6%, with 36% of the top European companies having made adjustments compared with the previous year. Bonuses paid out fell from 115% of base pay to 100% in 2014 and long-term variable remuneration ("long-term incentive" plans, or LTIs) was also lower than the previous year, at 119% of base pay.

Overall, the average total direct compensation in the top four countries was more than twice as high as that of the four countries with the lowest remuneration levels.

While in 2013 the CEOs of the ten biggest Swiss companies were still paid the highest salaries in Europe, and even though their salary levels remained unchanged at EUR 7.0 million, they have now been overtaken by their counterparts in Spain (EUR 7.2 million).

Olaf Lang, Head of Talent & Rewards Consulting at Towers Watson in Zurich, explains the reasons for this: "In the countries examined, the share of the base salary in total direct compensation has increased, while the share of long-term variable pay has fallen, apart from in Spain, where the reverse has been witnessed. This riskier compensation structure paid off for Spanish CEOs in 2014."

The statistical evaluation of total direct compensation levels shows that Switzerland is one of the leaders in Europe in this respect. Five of the Swiss companies included in the Eurotop 100 are in the top 20. The remuneration structure plays a key role here.

"Companies in countries with the highest levels of total direct compensation, of which Switzerland is one, typically take more risk than those in Scandanavia or Italy, for example", says Olaf Lang.

Among the Eurotop 100 companies in Germany and Great Britain, fixed remuneration makes up less than 30% of total direct compensation. At 32%, it is also comparably low in Switzerland. As a result, long-term variable pay in Great Britain and Switzerland is the highest in Europe, at 50% and 44% of total pay, respectively. Almost 60% of the Swiss companies studied provide long-term variable pay.

The variation between countries is due to the significant differences in company size, the range of sectors in which they are active, the differences in business models and the national markets in which they operate.

One gets a different picture when looking at the remuneration levels of companies in the individual main indices in the various countries.

Among the Eurotop 100 as well as the SLI companies, the oil and gas industry, pharma and consumer goods companies remain the frontrunners when it comes to total direct compensation. In Switzerland, CEO salaries are lower in industrial and technology companies.

The amounts paid out under variable pay systems are based on the company's financial results. 70% of the top European companies calculate bonus payments based on their profit.

"However, there is also now a trend to consider individual elements as well. For example, 55% of the Eurotop 100 companies set individual targets and in almost 80% of companies, non-financial targets are at least taken into account as well", explains Stephanie Schmelter, Manager of Board & Executive Compensation at Towers Watson.

Europe-wide developments regarding governance and investors mean that remuneration structures and systems among listed companies are becoming increasing aligned, but they are not all changing in the same way. Regulatory measures can further consolidate country-specific configurations.

Discussions are still ongoing about the controversial planned strengthening of shareholder rights when it comes to matters of remuneration. However, a decision has yet to be taken.