UK CEOs are the top earners in Europe, according to a comprehensive new study from Vlerick Business School’s Executive Remuneration Centre – with five out of the top ten highest paid CEOs across the major European economies based in the UK. For the largest firms, those with a balance sheet total of more than €10bn, total compensation (median) adds up to €5.65m the UK, compared with €4.27m in Germany, €3.15m France, and €2.91m the Netherlands.

The study looked at FTSE100 companies in the UK, and all listed companies in Germany, France, Belgium and The Netherlands, with 669 listed firms’ remuneration reports examined. Total UK CEO remuneration increased 25 percent over the previous year. Only the Netherlands showed similar growth (28 percent) with German CEO pay stagnating, and French CEO pay slipping 9 percent. Over the last two years, 63 percent of the UK companies have increased total CEO remuneration.

In terms of fixed compensation (salary) the UK only comes in at third place, after Germany (€1.32m) and the Netherlands (€1.15m), and followed by Belgium (€1m) and France (€940.000). The variable part of CEO remuneration, comprising both long and short-term incentives, is much higher as a proportion of pay in the UK (74 percent of total compensation) compared with countries in continental Europe: Germany (61 percent), Netherlands (50 percent), Belgium (36 percent) and France (34 percent). Long term incentives such as shares are more prevalent in the UK than elsewhere, and make up a larger proportion of total remuneration than in the other countries surveyed.

Another key finding of the study is that share-based remuneration overall is becoming less popular as an incentive. While 45 percent of firms in continental Europe were granting share-based remuneration in 2007, this has decreased to 23 percent in 2014. In the UK, share-based remuneration has decreased from 86 percent of firms offering it in 2013 to 75 percent in 2014. Professor Xavier Baeten says: “It’s clear from this research that the debate over how CEOs are remunerated is still extremely relevant. The UK has regained the top spot from Germany confirming the fact that the Anglo-Saxon corporate governance model, which is characterised by more dispersed share ownership, provides CEOs with more power in relation to the board, and leads to higher compensation levels.

What is most interesting about these results, however, is what drives CEO pay. While 98 percent of companies use financial KPIs based on such things such (operating) profit and share performance, under half incentivise bosses using non-financial indicators such as how well they treat their employees, customer satisfaction, environmental performance and the like. It seems to point to a pay culture that is still heavily weighted towards improving short-term performance, without much consideration for long term stability. Last but not least, in fact, CEO pay is driven by one factor: firm size.”