Financially secure forever, who doesn’t want that? Anyone who heads an S&P500 company has a good chance of achieving this goal in just one year.
CEO salaries at America’s 500 largest companies have risen for the sixth straight month. According to the Wall Street Journal, the average for 2021 is $14.7 million.
Peter M. Kern is at the top of the podium of top earners. The boss of the online travel agency Expedia Group garnished $ 296.3 million – 2900 times more than his average employee, who received at least $ 102,270.
David M. Zaslav, CEO of Warner Bros Discovery, comes second with $246.6 million. Tim Cook, who runs the second most valuable company in the world, Apple, was allowed to claim $98.7 million in 2021.
Best Swiss annual salary: 15 million
In Switzerland, Severin Schwan topped the list of top-earning Swiss CEOs in 2021. Annual salary: a good 15 million francs. Ralph Hamers from UBS came second with 11.5 million. These are still unimaginably high sums. But because the USA always serves as a role model, the question arises: Are top American salaries also a threat in Switzerland?
Swiss companies are significantly smaller. More than 60 companies in the S&P500 employ more than 100,000 people, in Switzerland there are just four. Compensation expert Urs Klingler (64) also points out that the separation of roles between the chairman of the board of directors and the CEO is often not very clear in the USA. The CEO therefore has even more influence – including on his own wages. There are also country-specific differences in the composition of salaries. In Switzerland, the fixed salary accounts for 20 to 30 percent of the total remuneration. In the US, on the other hand, wages consist almost entirely of variable compensation in the form of bonuses, shares and options. Of the almost $300 million that Peter M. Kern earned in 2021, only $850,000 in cash will be transferred.
Variable component as entrepreneurial motivation
As a rule, the variable part of the salary is only paid out once a certain share price has been reached on the stock exchange. This should encourage the CEO to act like an entrepreneur. However, the stock market value depends on many factors – the CEO has no influence on most of them, for example the current economy. Katja Rost (46), professor at the Sociological Institute of the University of Zurich, sees further problems: By publishing supposedly positive business figures, the CEO can boost the price of a company for a short time in order to collect his variable remuneration. The prospect of a large block of shares could also tempt the boss to only concentrate on the things that are measured. Long-term investments in new technologies no longer have any incentive for him/her. This is quite the opposite of an entrepreneur.
Swiss market more regulated
In Switzerland, bonuses, shares and options as part of the salary do not play such a big role as in the USA. This is partly due to the fact that there are stricter regulations in this country and the attractiveness of the bonuses was reduced after the financial crisis through penalty rules. In addition, according to Klingler, the performance hurdles in the United States are significantly lower than in Switzerland, which means that American CEOs can achieve their goals more easily.
The expert therefore does not believe that Swiss CEOs will advance in the same dimensions as their colleagues from overseas. He does not expect top salaries to fall or rise sharply. The shareholders at the general meetings would prevent such excesses.
What is a fair wage?
Katja Rost disagrees. She assumes that the Swiss financial center will increasingly emulate the American one. Due to globalization, managers move from one country to another and bring their experience and requirements with them. In addition, Swiss companies also want to bid for the top international CEOs. The managers get used to the high wages very quickly and only an exogenous shock, for example in the form of long-lasting inflation, would make variable remuneration uninteresting.
Is it even possible to determine a fair wage? Urs Klingler has a clear answer to this: «No. ‘Fair’ and ‘justified’ are subjective terms. On the other hand, the “fair market” remuneration can be determined. For responsible implementation, experience, ability and independence are of the utmost importance when making appointments to the board of directors.» Katja Rost particularly praises the remuneration system that the federal government and the cantons have implemented: “Performance and responsibility are worth it; but there is no exaggeration between minimum wage and maximum wage. In this way, these systems take into account the subjectivity of services, because the distance is perceived as fair.”
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