The CEO Pay Debate: USA and UK CEO Salaries Reviewed

Over the past few years, the turn of the new calendar year has chimed in with a much debated topic: the fairness of CEO pay. And whilst many gather on LinkedIn and other socials gather to hone in on the prospect of a CEO earning the average worker’s annual wage by the 4th day of January, it’s also good to put this debate into perspective.

As our USA and UK C-Suite Salary Calculators show, not all CEO’s deserve the wrap they receive. Yes, CEO’s operating in the top Fortune and FTSE corporates do earn eye-watering compensations, but these are far from the norm.

The role of a CEO has always been one of prestige, immense responsibility, and high stakes. CEOs are charged with leading organizations, driving strategy, and delivering results to stakeholders. Correspondingly, their compensation reflects these responsibilities and the impact they have on their companies. CEO’s in charge of smaller businesses might argue that their pay isn’t in-line with the responsibilities they take on.

This article delves into the CEO salary debate, focusing on both the UK and the USA, and examines the disparities between top-paying roles and more typical salaries.

CEO Salaries: The Upper Echelon

United States

In the USA, CEOs of major publicly traded companies are among the highest-paid individuals in the corporate world. According to recent reports, the median compensation for CEOs of S&P 500 companies in 2023 was approximately $14.5 million annually. This figure includes base salary, bonuses, stock options, and other performance-based incentives.

Notable Examples:

  • Elon Musk (Tesla, SpaceX, and others): Musk’s compensation package, often tied to performance and stock options, has frequently placed him at the top of the earnings list, with his 2021 compensation exceeding $10 billion (mostly in stock grants).
  • Tim Cook (Apple): In 2022, Cook earned $99.4 million, with the bulk of his compensation coming from stock awards and performance incentives.

These figures highlight the significant role equity plays in CEO compensation in the USA. Many of these leaders receive relatively modest base salaries compared to their total compensation, which is heavily influenced by stock performance.

United Kingdom

In the UK, CEO compensation is generally lower than in the USA but remains substantial. FTSE 100 CEOs earned a median total pay of £4.2 million in 2023. This figure includes base salary, bonuses, long-term incentive plans (LTIPs), and pension contributions.

Notable Examples:

  • Emma Walmsley (GlaxoSmithKline): Walmsley’s total compensation in 2022 was around £8.2 million.
  • Alan Jope (Unilever): Jope earned approximately £4.5 million in 2022.

Unlike their American counterparts, UK CEOs’ compensation packages typically include more structured pension contributions and slightly less emphasis on stock options.

The Average CEO Salary

While the media often highlights the extraordinary compensation of top-tier CEOs, these figures do not reflect the broader market. Most CEOs earn significantly less than those leading large public companies.

United States

The average CEO salary in the USA, spanning across businesses of all sizes, is approximately $200,000 to $300,000 per year. For private companies, non-profits, and smaller public firms, CEO compensation varies widely depending on the industry, company size, and geographic location. For instance:

  • Small Businesses: CEOs of small businesses typically earn between $120,000 and $150,000 annually.
  • Mid-sized Companies: Compensation ranges from $250,000 to $800,000, with performance bonuses and stock options less common than in larger firms.

United Kingdom

In the UK, the average CEO earns significantly less than their counterparts in the USA. For private companies and SMEs, CEO salaries range from £80,000 to £150,000 annually. In mid-sized firms, compensation may climb to between £200,000 and £500,000, often including bonuses and pension contributions.

Key Factors Influencing CEO Salaries

Industry

CEOs in high-growth, high-profit industries tend to earn more. Technology, finance, and pharmaceuticals often lead the pack:

  • In the USA, tech CEOs frequently top the charts due to stock-driven compensation.
  • In the UK, financial services and pharmaceuticals often dominate CEO pay rankings.

Company Size

The larger the organization, the higher the CEO’s compensation. Public companies with significant revenues and market capitalizations typically offer the most lucrative packages. By contrast, private companies, particularly smaller or family-run businesses, offer more modest pay.

Performance Metrics

Both countries heavily tie CEO compensation to company performance. Metrics such as revenue growth, profit margins, stock price, and market share influence annual bonuses and long-term incentives.

Geographic Differences

In the USA, higher salaries are often justified by a more competitive corporate environment and a stronger emphasis on shareholder returns. The UK, influenced by regulatory frameworks and cultural norms, leans towards more restrained executive pay packages.

Controversies and Trends in CEO Compensation

Pay Disparity

The growing disparity between CEO pay and the average worker’s salary has sparked significant debate over the years. In the USA, the CEO-to-worker pay ratio in S&P 500 companies was approximately 320:1 in 2023. In the UK, the ratio for FTSE 100 firms stood at about 109:1. Critics argue that these disparities undermine morale and contribute to economic inequality.

Regulatory Pressure

Both the UK and USA have faced calls for increased transparency and regulation regarding CEO pay. In the UK, regulations require companies to publish CEO pay ratios, offering greater insight into income disparities. In the USA, the Dodd-Frank Act mandates similar disclosures, though critics argue enforcement remains inconsistent.

Shifts Toward ESG Goals

In recent years, environmental, social, and governance (ESG) metrics have increasingly influenced CEO compensation. Both UK and USA companies are incorporating ESG performance into incentive structures, aligning executive priorities with broader societal goals.

Wrapping Up…

CEO salaries in the UK and USA demonstrates both striking similarities and notable differences. While top-tier executives in both countries command multimillion-dollar pay packages, the average CEO earns significantly less, reflecting the size and scope of their organizations. Factors such as industry, performance, and geographic norms heavily influence compensation levels.

As societal scrutiny and regulatory pressures mount, companies are navigating the delicate balance between rewarding leadership and addressing concerns about pay disparity. Whether in the UK or the USA, the conversation surrounding CEO compensation will likely continue to evolve, reflecting broader economic, cultural, and societal trends.