Bridging the Compensation Gap for European Companies Hiring Executives in the US

While there are numerous differences between the US and Europe, one of the most significant disparities in executive recruitment is compensation expectations, particularly for C-suite roles. Research shows that top executives in Europe are paid, on average, four times less than their counterparts in the United States.

According to Myriam Le Cannellier, Executive Director of Alexander Hughes USA, executive candidates in the United States will not accept below-market compensation.

The Size of the Compensation Gap Between US and European Executives

Historically, US CEOs earn between 1.4 to 5.5 times more than their European counterparts. Today, according to Salary Expert, executives in many European nations earn roughly half the compensation of their US peers.

Understanding the causes behind this pay gap is crucial for making informed executive search decisions, and it can help identify the right candidates for long-term success and tenure.

European clients are often shocked by the salary differences, seeing US compensation as extraordinarily high. However, just as a homebuyer adjusts their search based on their budget, the same approach must be applied when recruiting for executive positions in places like Chicago, New York, and Boston.

Key Factors Contributing to the Compensation Gap

Several factors—some within the control of companies and others beyond their influence—play a role in determining C-suite compensation. Economic differences, compensation structures, cost of living, and market size all contribute to the gap.
Economic Disparities
Since 1973, CEO compensation in the US has surged by an astonishing 1,480%. Factors influencing this growth include:
Yearly inflation: A $1 bill from 1973 would be worth $6.59 in 2022.

The 2020 pandemic: Executive compensation rose more than 30% between 2019 and 2021.

Business size: The largest US corporations have a market cap in the trillions, while the largest UK companies are under $250 billion.

Market size: The US GDP nearly doubles that of the eurozone, at $26.9 trillion versus $15 trillion.

Cost of living: Living expenses in the US are generally higher, with even the least expensive US state being more costly than 26 European countries.Living expenses in the US are generally higher, with even the least expensive US state being more costly than 26 European countries

Differences in Compensation Packages
In the United States, most executive compensation packages include stock options and awards that represent a significant portion of the total compensation, often 50% or more.  This is less common in Europe, where executives may have the option to invest in the company but are still required to purchase stocks at market price.
Additionally, health insurance is a major consideration in the US. Many European companies do not need to provide such benefits, but US executives typically expect full health coverage and other perks like HSA plans.

Different Role Expectations in the US and Europe
Executive roles are also interpreted differently between the US and Europe. For example, executives in the US may need to cover much larger geographic regions than their counterparts in Europe. In France, a single sales executive would never be expected to cover the entire country, but in the US, if someone is going to cover a large territory, that will lead to a higher compensation.
Furthermore, the US labor market tends to favor specialized skills, and generalist leaders can be harder to find. The demand for highly skilled executives means companies must offer higher compensation to attract top talent, making recruitment even more challenging for European companies entering the US market.

The Impact of Seniority on Compensation
Executives with 10-20 years of experience are often in high demand in the US, and they typically seek companies offering higher compensation packages to support their current lifestyle. Senior executives with 30 years of experience may accept slightly lower compensation because they’ve already met major financial milestones, such as paying off their homes and children’s education.

Navigating the Compensation Gap for European Subsidiaries in the US
While it’s not possible to completely eliminate the compensation disparity, there are several strategies European companies can adopt to attract top-tier US executive talent.
1. Reevaluate Budget Constraints
In some cases, companies may need to adjust their compensation budget to meet the market realities. Failing to fill a crucial role due to budget limitations can result in significant revenue loss. Increasing the budget to offer competitive compensation can be a worthwhile investment.
2. Adjust Role Requirements
When the budget is constrained, it may be necessary to revise the role specifications. This can involve focusing on essential qualifications and reevaluating the job description to align with the available budget, ensuring that only the most critical elements are emphasized.
3. Revise Compensation Structure
It’s important for European companies to offer a well-rounded and competitive compensation package. This package should include not only a competitive salary but also bonuses, incentives, vacation time, and benefits like a robust 401(k) plan with good employer matching.
4. Delay US Expansion Plans
If the budget is not sufficient to secure the right executive talent, it may be worthwhile to delay the expansion into the US market until there is enough investment to properly support a well-rounded leadership team. This will ensure that the company is prepared to attract and retain top candidates.

Recruiting the Right Candidate with the Right Compensation
Understanding cross-cultural compensation differences is vital in executive recruitment. Alexander Hughes US, with its offices in Chicago, Boston, and New York, specializes in assisting European companies with the recruitment of top-level executives for their US subsidiaries. Whether you are looking for C-suite executives in Industrial Manufacturing, Life Sciences, Consumer, Technology, Media & Telecommunications, or Financial Services, our team can help navigate the complexities of executive recruitment and compensation. 

We provide nationwide coverage, serving key regions across the US, including the Midwest, Northeast, Southeast, West Coast, and major metropolitan areas. By leveraging our global expertise and business background, we provide access to diverse candidate pools that may not be available to larger search firms. We focus on high-impact C-level and VP-level searches, ensuring that your leadership team is composed of the best talent.

Alexander Hughes US is recruiting for European subsidiaries in the USA from offices in Chicago, Boston, and New York, fulfilling C-suite positions across a wide range of industries. With our US Market Coverage Strategy, we bridge the gap for European companies recruiting senior executives in the United States. We ensure that your company is equipped with the right leaders to drive success.
To discuss your executive search needs, contact the Alexander Hughes US team in our Chicago, Boston, or New York office.