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Sports stars prove their worth with amazing feats on the field. The skills that drive executives to rise through the ranks are not so obvious. But much depends on a company’s ability to attract talented leaders. Should they be valued equally well?
Billionaire financier Lord Michael Spencer has weighed in on the debate, arguing that UK companies should be able to pay the bosses as “top-level footballers” without facing a backlash. It is one of the reasons why the UK lags behind other markets such as the US, he says.
The pay gap between the US and the UK is really big. American CEOs earn five times as much as their British counterparts, or more than double after adjusting for company size, according to a Schroders study of 2,353 CEOs. There are reasons to close the gap in the case of “Brilo” (“British in Listing Only”) companies that can change their listings to the United States. Construction equipment rental group Ashtead, which has just announced that it is move your listing from London to New Yorkfaced a battle in the summer over a plan that could have potentially paid CEO Brendan Horgan $14 million.
But there are many reasons why business owners would be ill-advised to compare themselves to footballers when it comes to salaries. On the one hand, they may not be flattered by the comparison. The median of the FTSE 100 CEO salary £4.1m last year was almost double the average for a Premier League footballer, according to research by the Financial Times.
On the other hand, corporate executives are more like managers than players. It is the players who are usually the best paid and extract the most value. Most Premier League clubs have a salary-to-income ratio of over 70 per cent.
The link between performance and remuneration is clearer in the sports world than in the business world. It’s easy to see the contribution of football stars like Erling Haaland to the success of his club. He scored 52 goals in his first season at Manchester City. The contribution of companies with higher revenues is less obvious. Four of the five biggest FTSE 100 CEO pay rises in 2022 were made by companies in the fossil fuel or arms industries, which were boosted by the large-scale Russian invasion of Ukraine, according to Luke Hildyard of the High Pay Centre. .
In cases where the performance of the footballers does not seem to justify the salary, the reaction can be brutal. Harry Maguire, once the most expensive defender in world football, became a laughing stock during a difficult period at Manchester United. Corporate bosses should take note: the more they are paid, the more criticism their mistakes will attract. Comparing yourself too easily to sporting heroes could be an own goal.