The Pay Gap Between American and German CEOs Explained

By Stephen Fuchs on Email @StephenWFuchs

Hundred Bills

There’s no questioning the fact that CEOs of American companies rake in some of the highest salaries, but are they doing more than their foreign counterparts to deserve it? Fortune looked into the question, contrasting what American CEOs make against CEOs in Germany.

The average pay last year for American CEOs in the S&P 500 comes in at $12.3 million, while those leading top companies in Germany only averaged $5.9 million. So what makes American CEO’s twice as valuable?

Fortune broke it down into two key factors. U.S. CEOs take more risk and in Germany the labor force has more of a say in deciding executive pay.

Researchers at the University of Virginia Business School found that the actual pay for CEOs in both countries are on par, but in the U.S., CEOs see their pay more closely tied to the share price of the company with more pay coming from equity. German CEOs have fixed pay structures.

Germany has one of the highest rankings in labor rights among workers in the world, and part of those rights include having representation on German corporate boards of directors. This not only gives the labor force more say in CEO salaries, but also allows for raising the average employee salaries when CEO pay increases.

Due to the more balanced say, the CEO-to-worker-pay ratio is 147-to-1 in Germany. While the gap is still large, it is much smaller than the 354-to-1 ration found in the U.S.

 

Source: Fortune
Photo: gazeronly [Flickr]

 

Stephen Fuchs
Stephen founded German Pulse and LGBT Germany out of a passion to introduce Americans to a Germany that goes beyond beer and polka (although with enough beer he has been known to polka it up a bit). He's a coffee addict, lover of wine and good times, a hit in the kitchen and editor of TV commercials. You can follow him on Twitter (@StephenWFuchs) to find out a lot more.
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