5 Global Trends In CEO Compensation: What Expat Executives Need To Know

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5 Global Trends In CEO Compensation: What Expat Executives Need To Know

As companies grow and expand globally, so do the compensation packages of their top executives. The world of CEO compensation is always evolving, and it is important for expat executives to stay informed of the latest global trends. Here are some of the top global trends in CEO compensation.

Increased Emphasis on Performance-Based Compensation

In recent years, there has been a shift from traditional compensation models to performance-based models. This means that CEO compensation is based more on the performance of the company and less on things like tenure or experience. This trend is particularly prevalent in the United States, where companies are becoming more aggressive in tying CEO pay to performance.

This shift also has significant implications for the arena of CEO recruitment. Organizations are now more intently looking for leaders who can meet specific performance metrics, rather than focusing solely on their previous positions or tenure. The process of hiring CEOs is becoming increasingly strategic, aligning with the company’s long-term goals.

Expat executives need to be aware of these performance-based compensation models, as they may be different from what they are used to in their home country. It is also important to understand how performance is measured and what metrics are used to determine compensation. Companies often use financial metrics such as revenue growth, profitability, and shareholder returns to evaluate performance. Understanding these metrics and aligning goals with them is crucial for expat executives seeking competitive compensation packages.

Rising Shareholder Activism

Shareholder activism is on the rise around the world, and it is having a big impact on CEO compensation. Shareholders are demanding more transparency and accountability from companies, particularly when it comes to executive pay. In some cases, shareholder activism has led to CEO pay cuts or changes in compensation packages.

Expat executives need to be aware of the potential impact of shareholder activism on their compensation packages. It is important to understand the company’s relationship with its shareholders and to be prepared to defend compensation decisions if necessary. Engaging with stakeholders, building relationships, and effectively communicating the rationale behind compensation decisions can help mitigate potential shareholder activism.

Increased Scrutiny on Gender Pay Equity

Gender pay equity is a hot topic around the world, and companies are increasingly under pressure to address disparities between male and female executive pay. This is particularly true in countries like the United States and the United Kingdom, where there is a growing awareness of gender pay issues.

Expat executives need to be aware of these trends and be prepared to address gender pay issues in their companies. This may include advocating for pay equity, supporting diversity programs, or taking other steps to ensure that women are paid fairly and have equal opportunities for advancement. Implementing policies to promote gender pay equity and fostering an inclusive work culture can help attract and retain top female executive talent.

The Impact of COVID-19

The COVID-19 pandemic has had a major impact on CEO compensation around the world. Many companies have been forced to implement pay cuts and other cost-saving measures in response to the pandemic. At the same time, some CEOs have seen their compensation increase, particularly in industries like healthcare and technology that have seen a surge in demand.

Expat executives need to be aware of how the pandemic is affecting CEO compensation in their industry or sector. They should also be prepared to make tough decisions about compensation in response to the pandemic’s economic fallout. This may involve taking temporary pay cuts or restructuring compensation packages to meet the financial challenges posed by the pandemic. Flexibility, adaptability, and effective leadership during these uncertain times are key.

The Rise of ESG Metrics

Environmental, social, and governance (ESG) metrics are becoming increasingly important in the world of CEO compensation. These metrics are used to measure a company’s impact on the environment, its social responsibility, and its governance practices. Companies that perform well on ESG metrics are often rewarded with higher valuations and better access to capital.

Expat executives need to be aware of ESG metrics and how they are being used to determine compensation. They should also be prepared to advocate for their company’s ESG initiatives and prioritize sustainability and social responsibility in their decision-making. By aligning compensation with positive ESG outcomes, expat executives can contribute to the long-term success of their companies by fostering a culture of sustainability and responsible business practices.

The world of CEO compensation is always changing, and it is important for expat executives to stay informed of the latest global trends. From performance-based compensation to gender pay equity and the impact of COVID-19, there are many factors that can influence executive pay. By staying up-to-date with these trends, expat executives can ensure that they are making informed decisions about their own compensation and helping their companies stay competitive in a constantly evolving market. Embracing transparency, diversity, and sustainability are key pillars for expat executives to consider as they navigate the complexities of CEO compensation in a global context.

Moving Abroad Checklist

Initial Considerations

Will your partner be travelling with you?

If so, what will they be giving up in your present home and will they be able to continue with their career in your new home? You will need to check whether a separate visa is required for your partner to work or if your visa gives that right. If they are unable to work you will need to decide on the effect on your finances and what alternatives are available to give a fulfilling life (home business, training, voluntary work).

Are you taking family with you?

Moving with family raises many exciting opportunities, but also can create challenges. The HSBC Expat Explorer survey indicates that expat kids can take six months to settle in to their new country (see article). Getting young or even older children to prepare to move and leave their friends and family behind can be a challenge and should be thought through.

The options for education is another area that needs to be thought through.

Moving your child to a new country with a different education system can be a great opportunity to broaden their experience, but if they are close to key exams the timing can make this inadvisable. If you do take your family with you, it is important to decide between joining the local school system or choosing an international school.

Where will you be living?

Whether you will be living in a house or apartment, furnished or unfurnished, these decisions will affect what you need to take with you. The time you are planning to live overseas will also affect whether you should leave your property at home empty, rent it out or sell it. See the article Sell, Store or Ship.