Where does it pay to work?

By Andrew Marshall, Practice Lead, Executive Compensation, Middle East

 

As executive pay programs come under closer scrutiny and grow more complex,  the issues around how companies set executive pay have never been more sensitive — or more important to business performance. There are many factors that need to be taken into consideration when deciding on a company’s executive compensation levels and every company is different in the way it approaches the design and governance of executive compensation programs.

 

Many companies view the Middle East as a single market for senior executives and set pay based on regional norms - but are other factors such as sector, country of ownership or professional function also important considerations to take into account?  Willis Towers Watson’s recent survey on total compensation levels revealed that 81% of executives are employed by regionally owned companies, which can influence pay for executives of comparable levels of seniority in similar sized companies.

 

Factors that influence pay levels

With regard to the industry companies operate in, the Willis Towers Watson Executive Compensation survey shows that across all levels of executive management guaranteed fixed pay, (base salary plus allowances), is consistently higher in financial services (excluding investment banking and other niche parts of the sector) than in the rest of the economy as a whole.  Broadly speaking, guaranteed fixed pay is around 20% higher in financial services than in the rest of the economy.

 

Whether a company is owned and domiciled in the region or headquartered outside of the region also impacts pay levels.  International companies pay higher fixed pay  than regionally owned companies, and typically in the range of 10% to 15% higher according to the survey.        

 

As for the job family or professional function, this consideration also suggests that different pay premiums apply across different skill sets driven by market supply and demand factors as well as  job size.  Across all levels of executive management, senior jobs in sales and marketing are paid lower than those found in finance and perhaps more surprisingly, in human resources.

 

The Willis Towers Watson survey shows that, for the biggest executive jobs, those companies without a long-term incentive plan typically pay more than those that offer a long-term incentive. Conversely, for smaller executive jobs, the companies that provide a long-term incentive pay more than those that don’t. 

 

This is explained by the fact that the biggest jobs in the survey come from regionally owned companies where the provision of long-term incentives is not  typical practice.  On the other hand, multi-national companies  tend to provide long-term incentives to executives in the region, consequently delivering  higher levels of total pay than comparable roles in regionally owned companies.   

 

The findings of the survey reveal that the way peer groups are defined will impact the benchmarking results in terms of both pay level and pay mix. 

 

Differences in executive pay levels and practices exist and companies   should seek to understand why, and to what extent, these differences are  when translating their reward strategies into practice.

 

About Andrew Marshal

Andrew leads our Executive Compensation practice in the Middle East; he specialises in advising Boards and top management on all aspects of executive pay strategy, design, implementation and governance.  In addition to his consulting experience Andrew has worked in-house as Global Head of Reward for Barclays Private Clients where he was responsible for the pay of 18,000 executives and employees.

 

Andrew has over 25 years’ experience spanning all aspects of executive and all-employee reward and sales compensation gained in both line management and consulting. He has advised a broad range of companies spanning family-owned, PE backed and major UK listed public companies. Andrew was a Director in the London Executive Compensation practice of Willis Towers Watson for 11 years where he led the European Financial Services practice and was also responsible for developing the Turkish market for the firm.  He began his consulting career at Mercer and then PwC.

 

 

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