The remuneration of a CEO in Portugal is, on average, 1.5 times higher than the remuneration of other executive members and 10.9 times higher than the average remuneration of other employees of the organization.
These are the conclusions of the “Executive Compensation” study, developed by Mercer, which examined 40 organizations operating in Portugal, including 13 PSI listed companies, and analyzed seven different functions of executive members.
Other figures presented by this study show that 67% of CEO compensation is in their base salary, 26% in short-term incentives and 7% in long-term incentives. On the other hand, 59% of executive compensation corresponds to their base salary, 24% to short-term incentives, 10% to long-term incentives and 7% to guaranteed subsidies.
The Executive Pay study also shows that the composition of the Executive Committees of the organizations surveyed is predominantly male (75%) and for CEO positions the discrepancy is even greater, with 90% of companies headed by men.
The data also reveals that bonus payments in 2022 relative to 2021 performance were higher than pre-pandemic figures and that ESG (Environmental, Social and Governance) strategy continues to be a hot topic for Remuneration Committees.
Mercer also points out that 100% of organizations surveyed claim to have established a short-term incentive policy. “According to the data, the short-term incentives attributed to the CEO correspond, on average, to 51% of the corresponding base salary. In turn, this percentage is slightly higher for executives reporting directly to the CEO, which is on average 48% of base salary,” they explain.
On average, the maximum short-term incentive corresponds to 95% of the CEO’s base salary and 92% in the case of executive members who report to the CEO.
53% of the organizations surveyed have also defined a long-term incentive policy, with the main incentive being performance-based stock returns. The average value of long-term incentives as a percentage of base salary is 63% for CEOs and 61% for other executive directors.
“Organizations live in difficult times. While grappling with a scenario of uncertainty at the geo-economic level, with the effects of inflation on reducing disposable income, organizations must seek the balance and adequacy of their incentive pay policy from the top to the bottom of their structure to maintain the coherent and motivated organization,” says Tiago Borges, Career Business Leader at Mercer Portugal.
For 2023, Mercer forecasts that wage increases in mature markets will be higher than recent figures but well below current inflation expectations, that actual performance bonus payments are likely to be lower than in previous years across most sectors and that long-term incentives may remain slightly strained for companies setting financial targets for 2022 in early 2020 before the pandemic with 2019 as a base year.