Long-term incentives are valued significantly more for both American CEOs and CFOs than in other regions and takes the form of performance awards, restricted stock, and stock options. (Photo: Shutterstock)

The top brass in the largest companies throughout the Americas are incentivized more to perform than those elsewhere around the globe—making their total pay levels higher, according to the inaugural “2018 Global Top 250 Compensation Survey of CEOs and CFOs.”

Three advisors to corporate compensation committees—FW Cook Inc., FIT Remuneration Consultants LLP and Pretium Partners Asia Ltd.—analyzed the CEO and CFO compensation packages of the largest 250 publicly traded companies worldwide by market capitalization (excluding those that did not list the compensation of their CEO and/or CFO in their most recent disclosures).

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Total pay levels are higher in the Americas than in Europe and Australia (grouped together for analysis) or Asia. However, when analyzing the median levels, a significant portion of the total package (91 percent for the CEO and 86 percent for the CFO) is tied to annual bonuses and long-term incentives, with the majority of the package (75 percent for the CEO and 69 percent for the CFO) weighted towards long-term incentives.

“In the Americas, there exists variation in pay structure and pay mix between CEOs and CFOs, with CEOs having greater emphasis on variable pay, particularly long-term incentives, the authors write. “This is reflective of the 'star culture' in the U.S., where the CEO is often considered to be the main driving force behind a company's strategy and performance and is, therefore, highly incentivized.”

Base salaries in Europe and Australia are in general higher than in other regions, with total cash compensation–base salary plus annual bonus–being broadly in line with the Americas. Long-term incentives are more modest in Europe and Australia, and as a result, total pay is significantly lower than in the Americas.

Moreover, pay structure is broadly similar between CEOs and CFOs in Europe and Australia, with base salary levels being the main differentiator. This is partly led by the U.K., where the CFO is typically a board director.

“Pay levels and structure among Asian companies in the Global Top 250 are affected by the fact that a number of the largest companies in China and Hong Kong are state-owned enterprises and pay is therefore regulated,” the authors write. “As such, base salaries and bonuses at these companies are not market driven and long-term incentives are generally not provided.”

In Asia, pay is generally similar between CEOs and CFOs in terms of structure, balance and levels given collective accountability in key decisions.

Within the Americas, other key findings include:

• Base salaries are typically below the global “average” level when adjusting for company size.
• Annual bonus levels are higher than in the other regions for the CEO but are in line with Europe and Australia for the CFO.
• Total cash compensation is typically in line with the global “average” level when adjusting for company size.
• Long-term incentive value is significantly higher for both the CEO and CFO than in other regions and takes the form of performance awards, restricted stock, and stock options.
• Total direct compensation is typically above the global “average” level when adjusting for company size.
• At median, a CFO's base salary is 57 percent of the CEO's whereas a CFO's total direct compensation is 34 percent of the CEO's due to smaller annual bonus and long-term incentive awards.

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