Across the Pond: A Pay Gap Worth Widening

Just a quick note of interest this week. The Financial Times has reported that European bank CEOs are paid less than half of what bank CEOs in the United States earn. CEOs at the top nine European banks earned an average of £4.8 million pounds, while those at the big US banks earned an average of £10 million. The Financial Times and PWC attribute these findings to two causes: the weak performance of European banks, combined with EU rules that limit bonuses to two times salary. Although the EU’s banker bonus cap regulations were not perfectly drafted (see my earlier blog post on this), at least they can be credited with having some impact.

It is not entirely surprising that this transatlantic pay gap is widening. For one, the American executive pay culture is far more out of control than it is in Europe. Secondly, American banks tends to be significantly bigger than European banks, “justifying” bigger pay cheques in the minds of remuneration committees. Finally, European banks have had an all-around poor year. It would be shocking to find the pay gap narrowing given recent performance.

While this should be seen as a partial measure of success to advocates of reining in executive pay, I am sure it will cue predictable cries of a looming brain drain from other circles.

 

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