
IN-DEPTH: How different markets approach CEO pay ratio disclosure

Recent years have seen investors start to consider the wider workforce experience and issues around wage inequality in their approach to executive pay.
It comes as the U.S. has required publicly-listed companies to disclose their median employee-to-CEO pay ratios since 2018, while the U.K. followed suit in 2019.
As Europe plays catch-up, with many countries still not requiring formal pay ratio disclosure, Diligent Market Intelligence (DMI) explores how some of the jurisdictions are moving toward enhanced reporting.
U.S.
In the U.S., the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was passed in 2010, has required publicly-listed companies to disclose the ratio of the compensation of their CEOs to the median compensation of all company employees. The move also gave companies the flexibility to select their own methodology for identifying the median employee and that employee’s compensation.
While the legislation was designed to provide investors with information to evaluate CEO compensation, pay ratio is not currently referenced in the voting policies of any of the Big Three asset managers.
In 2024, S&P 500 CEOs had an average pay ratio of 261 to one in comparison to the median employee, while Russell 3000 CEOs had an average of 166.9 to one.
According to DMI’s recently published Executive Compensation in 2024 report, CEOs in the consumer cyclical sector within the S&P 500 had the highest pay ratios compared to any other sector at 505.9 to one, while those in the utilities sector recorded the lowest at 99.6 to one. The communication services sector presented the biggest shift, with the average pay ratio increasing by 65.4% on the year prior to 443.8 to one.
U.K.
Since the beginning of 2019, following the introduction of executive pay transparency measures, U.K.-listed companies with over 250 employees have by statute been required to publish information detailing their CEO’s single figure of total remuneration in comparison to the 25th percentile, median and 75th percentile of employees – the only market to do so at all three levels.
The measure aimed to make such companies justify their pay for top bosses and account for how those salaries relate to wider employee pay.
In addition to reporting pay ratios, the legislation requires all large companies to report on how directors take employee and other stakeholder interests into account and creates a statutory duty to set out the impact of share price growth on executive pay outcomes.
Wage inequality has been a focus for responsible investment NGO ShareAction for a number of years and most recently in a campaign that warned shareholders in Britain’s largest retailers over long-term financial risks unless action is taken to improve pay and conditions for low-paid workers. At the retailer's 2024 annual meeting, the investor group pressed Tesco on CEO pay as part of its living wage campaign.
In 2023, CEOs in the FTSE 100 index were paid 119.6 times their company’s lower quartile employee on average, 88.9 times more than the median employee and 64.8 times more than the upper quartile employee.
In the FTSE 250 index, CEOs were paid 62.7, 46.1 and 32.8 times more than the lower quartile, median and upper quartile employee, respectively.
France
In France, as part of la loi PACTE, legislation introduced in 2019, listed companies are required to disclose the ratios between the CEO's remuneration and the median and average remuneration of employees over the previous five years along with a five-year comparison of pay and performance.
French-listed companies disclose the ratio between the compensation of executive officers and the fulltime equivalent basis compensation of the mean and median (50th percentile) employees. The executive officers’ compensation is excluded from the employee compensation calculations.
In 2023, CEOs in France’s CAC40 index were paid 68 times more on average than the median employee and 65.6 times more than the mean employee. In the country’s SBF 120 index, CEOs were paid 41.9 times more than the median employee on average, and 32.9 times more than the mean.
The Netherlands
First introduced into the Netherlands corporate governance code in 2016 and applied as of the 2017 fiscal year, companies based in the country are required to report on the pay ratio between the CEO and the mean employee within the company and its affiliated enterprises, and, if applicable, any changes in these ratios compared to at least five previous financial years.
In 2023, CEOs in the Netherlands’ top index, Amsterdam Exchange Index (AEX), recorded a pay ratio of 51.3 compared to the mean employee, while CEOs in the Amsterdam Midkap Index (AMX) and Amsterdam Small Cap Index (AScX) recorded pay ratios of 35.7 to one and 11.2 to one on average, respectively.
Elsewhere in Europe
Other European countries such as Finland and Denmark require listed companies to disclose CEO pay ratios in comparison to the mean employee.
Based on disclosures examined by DMI, companies listed on Finland’s OMX Helsinki 25 index paid their CEOs 37.1 times more than the mean employee in 2023, while CEOs at companies listed on Denmark’s OMX Copenhagen 20 index were paid 50.3 times more than the mean employee.