UK CEOs: Fleeing to America?

Stories of Brits finding fame and fortune in London go back centuries. For instance, Dick Whittington climbed his way from poverty to being Lord Mayor of the capital in the 14th century. But lately, the city has been somewhat off the boil.

In an alarming trend, the CEOs of some big listed British companies have recently ditched their jobs for top positions in the US. The industries range from pharmaceuticals to medical devices to consumer goods, and UK experts say it’s the kind of brain drain that can hurt not just the firms, but the struggling UK economy overall. “It’s not a good trend, especially if it worsens,” says Grant Duncan, Korn Ferry’s managing director and sector lead for media, entertainment, and digital EMEA. It's a sentiment echoed by the head of the London Stock Exchange Group, who cites the country’s need to “attract world-class talent.” 

Experts say the attraction to bolting across the pond is obvious: CEOs in the US are paid an average of three times as much as their UK counterparts, according to data from the UK's High Pay Centre and the AFL-CIO trade federation. American corner-suite leaders are also subjected to less media scrutiny of hefty pay packages. In 2022, the top 100 public UK companies paid their CEOs an average of £4.4 million (USD $5.5 million) versus USD $16.7 million for CEOs of the top 500 US companies,

To be sure, companies in the US tend to be bigger, which typically correlates with higher pay. The largest American firms have a market capitalization of up to $3 trillion, while no UK firm has a market cap of even a quarter of a trillion dollars. The bigger the company you are running, the more you will get paid, says Ben Frost, a senior client partner in Korn Ferry's Products business. “In some cases, it’s quite a lot higher,” he says. Overall, pay is higher in the US than in most other places. America's GDP per capita is around USD $64,000, versus the equivalent of USD $48,000 in the UK, according to data from Trading Economics.

In Britain, shareholders vote on how much to pay executives—and that vote is binding. This isn’t something that American companies have to worry about. “Highly paid CEOs in the US don’t get vilified in the press nearly as much as they do in the UK media,” Duncan says.

There’s also an issue with economics. There’s far more opportunity in the US, along with an embracing of entrepreneurial culture. “If you are minded that way, your riskier ideas will be more likely to flourish in the US,” Duncan says. That’s particularly true at the moment, as the UK economy has been stuck in the doldrums with little growth, if any, over the last two years.

Still, some things are helping retain British CEOs. This includes a preponderance of long-term incentive programs (LTIPs), usually awarded annually in the UK, that can become the executive’s property over time, typically three years. The programs often include company stock, and the recent strength in the markets has made some of these LTIP holdings huge, says Paul Benson, Korn Ferry’s regional managing partner, EMEA industrial markets. In turn, that means another company will need to pay an incoming CEO the value of what isn’t vested. “It can become be really difficult to move someone,” he says. 

That’s less of a problem for well-heeled US companies that don’t need to worry about the money. But the LTIPs can be like superglue for CEOs, if they can be convinced to buy into a long-term vision of the company, says Bob Casey, Korn Ferry’s managing director for Ireland. “You’d hope the CEOs would see that potential for growth in their LTIP,” he says.

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