European CEO pay rises 12% as benchmarking against US competitors is linked to wider pay gaps

Median European CEO pay rose by 12% last year, according to new research from Vlerick Business School. CEOs at companies benchmarking against US peers typically earn 80 times their employees’ pay, versus 47 times without US benchmarks.

Larger long-term incentives for CEOs may even come at the cost of shareholder value, the study also finds.

Conducted by Professor Xavier Baeten and senior researcher Marthe Van Hove at Vlerick’s Executive Remuneration Research Centre, the annual CEO Remuneration Report analyses companies in the STOXX Europe 600, an index comprising 600 listed companies across 17 European countries.

- Median total CEO remuneration reached €4.65 million in 2025

Since 2016, it has risen by 48% before inflation, including a 68% increase among UK companies, where the median reached €6.07 million. France and Germany recorded medians of €5.19 million and €5.28 million respectively. German CEOs’ median base pay of €1.40 million is 22% above the European benchmark.

Long-term incentives (LTIs) are the largest and fastest-growing component of CEO pay, up 41% since 2016. Yet grants above 200% of base pay are linked to lower three-year shareholder returns, a clear warning to boards and investors.

Larger short-term incentives (STIs), such as annual bonuses, showed no link to better performance over one or three years.

The researchers question overlapping financial KPIs, which add complexity without clear evidence of greater shareholder value.

“Some companies just pick one KPI and use it for both STI and LTI. The executive is going to be rewarded for the same KPI in both the short term and the long term. Boards should focus on how incentives are designed and look for KPIs that express strategic priorities, rather than copying market practice and assuming bigger rewards produce better results,” says Professor Baeten.

- Non-financial targets feature in 72% of LTI plans, but carry only 18% of the weighting

This is up from 64% of companies in 2023, although financial KPIs still account for 82% of the average weighting. Accounting measures, including profit and cash flow, are used by 80% of companies, while 70% use share-based measures such as total shareholder return.

Climate change is the most common non-financial LTI target, used by 47% of companies (45% in 2023), including 65% in Germany, 62% in France and 47% in the UK.

For STIs, 37% of companies include climate change targets, unchanged since 2023. France’s figure is 70%, almost twice the European proportion, compared with 33% in the UK and 38% in Germany.

Diversity targets fell from 14% to 8% of LTI plans since 2023. France is highest at 20%, compared with 10% in Germany and 7% in the UK.

- Female CEO representation increased from 3.7% in 2016 to 9.6% in 2025

Female CEO representation reached 12.5% in the UK and 7.7% in Germany last year. After accounting for company size, financial performance and country of listing, the researchers found no statistically significant difference in remuneration between male and female CEOs.

- US pay comparisons can put upward pressure on European CEO remuneration

To examine how remuneration is set, the researchers analysed when US companies were used as benchmarks for CEO pay and found that 51% of companies benchmark their CEO remuneration against at least one US competitor. Higher US pay makes European packages look low, pushing them up, mainly through larger LTIs.

“We seem to be importing a practice which is typical for a specific societal, economic and stock market context into a continent which has a different approach,” says Van Hove.

Overall, Baeten and Van Hove conclude that CEO pay has become too complex to deliver lasting value.

The full report is available here.

/ENDS

For more information, or to speak with Professor Xavier Baeten, please get in touch with Alex Lopez at [email protected], or on +44 (0)1582 797959.