New High Pay Centre report shows that just foreign poaching of CEOs accounts for just 0.8% of appointments
High Pay Centre
Less than one per cent of top chief executives are poached from overseas, and 80% are promoted from within the company, proving that justifications for high pay in the UK due to a highly-paid global talent pool are a “self-serving myth”, according to the most comprehensive study to date of international moves in the world’s top companies, released by the High Pay Centre today.
The report, Global CEO Appointments: A Very Domestic Issue, explodes the notion that huge financial incentives are a must to keep talent in the UK. Drawn from The Fortune Global 500, of CEO appointments from the largest companies in the world, the report shows that:
– Only 4 chief executives out of 489 were poached while CEOs of another company in a foreign country – just 0.8% of total appointments
– Only one CEO was poached while CEO of another company in another continent
– In North America, Japan, Latin America and Eastern Europe not one CEO was appointed from outside the country where the company is based
– 80% of CEO appointments in the world’s largest companies are internal promotions
– Just 6.5% (32) of current CEOs were poached from another company while serving as a CEO.
Global CEO Appointments: A Very Domestic Issue argues that the supposed scarcity of talent, and what is claimed to be the highly competitive market for that talent, is principally responsible for pushing up pay to the current levels. Yet the vast majority recruit from within, and only a tiny number of companies look outside their country to find a successor who is in another CEO role.
Director of the High Pay Centre, Deborah Hargreaves, said today:
“The global talent pool is, in fact, a drop in the ocean. These findings debunk the myth about internationally mobile chief executives flying around the world for new roles. This is one of the reasons for the sharp rises in executive pay in the past decade.”’
The report shows that only in Western Europe were any chief executives hired from abroad whilst CEOs there. Yet this amounts to only four appointments (Peugeot Citroën; Bayer; Holcim and; International Airlines Group) out of a total of 153 Western European companies in the study.
Justifying his own pay package to the BBC in 2011, Sir Martin Sorrell, chief executive of media company WPP, asserted that his company was forced to compete internationally for top executives: “Look at what chief executives of media companies are paid in other parts of the world,” he said. “We are the leading company in our industry. The comparison, whether you like it or not, is with other companies in the world.” Sir Martin’s pay package in 2011 was £12.93 million, a reported 56 per cent increase on the previous year.
Deborah Hargreaves added:
“Huge executive pay packages can no longer be justified on the basis that there is a competitive international market for chief executives. For the vast majority of these top executives, their priority is to develop the company and its people, and turn the business into a world leader. Shareholders should be wary of the person who is incentivised purely by the bonus – as this is what led us into the financial crisis we see today.”