Money talks, but not always in the same language. US bosses tend to be paid a lot more than peers running similar businesses listed in the UK. Some of the latter complain vociferously — albeit privately — about the disparity. Higher executive pay could be one implicit reason for switching over to a US listing.
This matters, because the City of London is currently wringing its hands over no-shows and departures. SoftBank plans to list UK-based chip designer Arm solely in New York. Irish multinationals Flutter and CRH, which specialise in bookmaking and building materials respectively, may ditch London listings in favour of Gotham.
There are good explicit reasons to switch, including New York’s higher valuations, deeper liquidity and bigger peer groups. Regulation is, meanwhile, an issue for Arm. But Lex number crunching shows the pay disparity could be large enough to provide a further nudge for executives.
Adjusting for enterprise value, US chief executives in the same sector earn about 2.5 times more on average than Albert Manifold who runs CRH. That would equate to a $16.5mn pay rise to $27.5mn. But Manifold is due to retire next year and is therefore unlikely to receive any benefit from a listings switch.
The gap for Flutter and Shell — which contemplated leaving but decided to stay — is even bigger at 3.5 times. The average pay of CEOs running US peers is $10mn and $23mn respectively.
In the overlapping corporate worlds of Ireland and the UK, pay policy tries to balance retention of top staff with avoiding public accusations of greed. Shareholders are hostile to pay deals that appear large by local standards.
They also push back against anything other than long-term incentive plans, which typically vest after five years. This makes it harder to incentivise top staff, according to David Tuch of Alvarez & Marsal, a US-based professional services firm.
Regulation, Brexit and pension funds are already bearing public blame for the decline of the London stock market. But you can bet that when reformers draw up lists of remedies, higher pay for CEOs will not even merit a mention.
The Lex team is interested in hearing more from readers. Please tell us below what you think of the disparity between pay levels for CEOs of UK-listed companies and those quoted in New York