The leaders of the FTSE 100 claim they are struggling compared to the United States. But our analysis suggests a very different story: are British bosses REALLY underpaid?

A story about a CEO about to join a high-profile British company has gone down in City folklore. Before he takes the reins, a trusted advisor asks him the rather awkward question of how much he thought he should be paid.

“How much do you think I can get away with?” came the haughty reply.

It’s an intriguing insight into the well-deserved, self-interested mentality that still prevails in some British boardrooms, despite decades of efforts by campaigners to clamp down on ‘fat cat’ wages and the cost of living pressures that households have been affected. The number of leading companies pushing for pay rises for their leaders has risen, even after earning an average of £4.5 million, a recent survey found.

The analysis by business consultancy Deloitte shows that sixteen FTSE 100 companies want to renew their remuneration policies. Nine of them have ‘radical’ plans to increase their boss’s pay this year, up from four previously.

“Many of these companies have a significant US footprint and cite the disparity in pay levels between Britain and the US as a challenge in competing for and retaining senior talent in a global market,” said Deloitte partner Mitul Shah.

But are British bosses really underpaid? And is there any evidence that more lucrative deals on the other side of the Atlantic are causing an exodus of top talent?

To find out, The Mail on Sunday compared the pay of top executives from leading companies on both sides of the pond. We found that American bosses generally earn more than their British counterparts, but the difference is not always that great, especially when stock market valuations are taken into account.

BAE Systems’ Charles Woodburn took home £13.5 million last year – almost £5 million less than the Lockheed Martin boss. But the US defense contractor is worth more than twice as much as BAE based on their respective share prices.

The same goes for the oil and gas sector, where Shell’s Wael Sawan recently joined the growing chorus of bosses threatening to leave London. It seems like he and Murray Auchincloss of BP are paid a pittance compared to their counterparts at Exxon and Chevron – until you realize that investors value shares in the US energy giants much more.

Pascal Soriot, CEO of pharmaceutical giant AstraZeneca, once complained that he was “the lowest-paid CEO in the entire industry.”

He has since been playing catch-up and is now Britain’s highest paid boss, with an income of £16.9 million last year. Soriot still lags behind his US counterpart at Eli Lilly, but according to a recent Financial Times analysis, he is in the middle of the ‘Big Pharma’ salary package. That could explain why more than a third of AZ shareholders this month opposed plans to give him a huge pay rise.

Experts say pay gaps exist because American bosses are rewarded far more in stock than in salary, but that comes with risks.

“The danger of packages that focus too much on the price development of shares is that they can lead to short-term thinking,” says Russ Mold of investment company AJ Bell.

The average tenure of a FTSE 100 boss is just over five years, he notes. “It’s not difficult to cut costs or make an acquisition to boost short-term earnings – and perhaps the share price,” he adds. Another reason American bosses get paid more could be that they are better managers.

One of the leading calls for bosses to be paid more has been Rupert Soames, chairman of the lobby group Confederation of British Industry.

He has dubbed many companies in the FTSE 100 ‘Brilos’ – ‘British in Listing Only’ – because the majority of their revenue comes from abroad. As chairman of Smith & Nephew, Soames is busy urging shareholders to give CEO Deepak Nath a huge pay rise this week.

GSK boss: Emma Walmsley

GSK boss: Emma Walmsley

It is true that Nath earns a lot less than his colleague at Stryker. But that may be because investors value the American rival higher, giving it a price tag that is more than ten times that of Smith & Nephew.

Also on the warpath is Julia Hoggett. The CEO of the London Stock Exchange has warned that a ‘lack of a level playing field’ is causing a brain drain from the city to New York and beyond. Another showdown took place earlier this week when investors backed plans to more than double the pay of her boss, David Schwimmer, to £13.2 million.

That has aligned him with Jeffrey Sprecher, who owns the New York Stock Exchange, Intercontinental Exchange.

Companies such as chipmaker Arm Holdings, plumbing giant Ferguson and Tarmac owner CRH have already moved their main listing to Wall Street.

Executive salaries are higher in the US, but so is pay inequality. While the typical FTSE 100 boss earns 109 times more than the average worker’s salary, the ratio in the US for the top 500 companies is 272 times.

But it is often forgotten that American bosses also have much more power in the boardroom than their British colleagues. They usually combine the roles of CEO and chairman – something that is frowned upon here. There is also little evidence of an active transfer market of disgruntled British managers heading west for big money.

Perhaps the most successful British-born executive in the US is Jane Fraser, but she rose through the ranks before taking the reins at investment bank Citigroup.

It is also telling that the list of highest-paid British company bosses is dominated by foreigners. That suggests London remains a magnet for attracting and retaining top global executives – regardless of salary.

At the very least, reports of the city’s decline as a leading financial center appear premature.

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