Schroders has highlighted a significant disparity in executive pay between the UK and the US, warning that it could lead to a talent exodus. The asset manager believes the UK must match US compensation levels to remain competitive in attracting top talent.
The Executive Pay Disparity
A recent analysis by Schroders, managing approximately £760 billion in assets, reveals UK CEOs earn on average one fifth of what their US counterparts receive. Even after adjusting for company size, US executives are paid more than twice as much.
Impact on Talent Retention
Kimberley Lewis, Schroders’ Head of Active Ownership, emphasises that the pay gap, coupled with the dynamic US corporate environment, may undermine the UK’s ability to retain top talent. The opportunities in the US for leading larger companies and taking on challenging roles are highly attractive.
Call for Higher Pay
Lewis contends there is justification for higher pay to ensure global competitiveness. Excessive pay remains contentious, but the necessity of attracting and retaining talent cannot be ignored.
Debate over Executive Compensation
Arm, the Cambridge-based microchip designer, chose Wall Street last year, highlighting the shift. These developments have spurred reforms to enhance London’s appeal, including overhauling listing regulations.
Attitudes Towards Executive Pay
Lewis warns that not addressing this issue could have significant repercussions. The benefits to savers, pensioners, and investors could be compromised if UK companies fail to compete globally for talent.
Risks of Ignoring the Pay Gap
Lewis raises concerns over the potential negative impact on shareholder returns. Higher pay is crucial to reassure investors that UK markets are a good place to invest their capital.
Conclusion
Matching US compensation levels is essential to retain top talent and ensure the health of the UK’s capital markets.
In conclusion, the executive pay disparity between the UK and the US poses a significant risk to the UK’s ability to retain top talent. Addressing this issue by offering competitive pay will help ensure that UK companies can compete globally and reassure investors of the market’s viability.