Europeans close wage gap with American business leaders

HR Magazine, March, 2004 by Steve Bates

European executives are closing the pay gap with their U.S. counterparts and in some cases are earning more than American corporate leaders, according to a study by the Hay Group, a consulting firm based in Philadelphia.

A survey of more than 1,000 European executives and about 700 American business leaders showed a wider diversity of executive compensation practices and levels in Europe than in the United States. It indicated that total cash compensation--base salary and bonus--has begun to converge across continents.

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Among the Hay Group's findings:

* The United Kingdom dominates Europe in terms of base salary, about 24 percent above the continental median for top jobs.

* The highest levels of total direct compensation in Europe--including total cash plus long-term incentives--were found in France and Germany.

* U.S. base salary levels are close to European wages: 4 percent to 7 percent higher for the highest positions but about 13 percent below the European norm for second-rung positions.

"Top executive remuneration packages in European companies are the result of a range of influences," states the Hay Group report. "Tax effectiveness has often been a major influence, especially in high-tax countries where some forms of remuneration--commonly pensions and share options--have been highly tax favorable for employees relative to cash pay. In some cases the tax or other drivers have changed, but compensation package design has not."

The survey was conducted last year when the euro was worth about $1.12.