Why business should not ape football when it comes to pay

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Sports stars prove their worth with astonishing feats on the pitch. The skills that propel executives up the greasy pole are not so obvious. But a lot rides on a company’s ability to attract talented leaders. Should they be valued just as highly? 

Billionaire financier Lord Michael Spencer has weighed in on the debate, arguing that UK companies should be able to pay bosses like “top-rate footballers” without facing a backlash. It is one reason why the UK lags behind other markets such as the US, he says.

The US-UK pay gap is indeed big. American chief executives earn five times as much as their British counterparts — or more than twice as much after adjusting for company size, according to a Schroders study of 2,353 chief executives. There is a case for bridging the gap in the case of “Brilo” (“British in Listing Only”) companies liable to switch listings to the US. Construction equipment rental group Ashtead, which has just announced it is moving its listing from London to New York, faced a battle in the summer over a plan that could have potentially paid chief executive Brendan Horgan $14mn.

But there are many reasons why bosses would be ill-advised to compare themselves with footballers when it comes to pay. For one thing, the comparison might not flatter them. The median FTSE 100 chief executive pay of £4.1mn last year was nearly twice that of the average Premier League football player, according to FT research.

For another, corporate executives resemble managers more than players. It is the players who are usually better paid, and extract most of the value. Most Premier League clubs have a wage-to-revenue ratio of more than 70 per cent. 

The link between performance and pay is clearer in the sporting rather than corporate world. It’s easy to see the contribution of football stars such as Erling Haaland to his club’s success. He scored 52 goals in his first season at Manchester City. The contribution made by top corporate earners is less obvious. Four of the five largest FTSE 100 CEO pay increases in 2022 were made by companies in the fossil fuel or arms industries, which were boosted by Russia’s invasion of Ukraine, according to the High Pay Centre’s Luke Hildyard.

In cases where the performance of footballers does not appear to justify the pay, the backlash can be brutal. Harry Maguire, once the most expensive defender in world football, became a laughing stock for a time when he went through a difficult period at Manchester United. Corporate bosses should take note: the more they are paid, the more their errors will attract criticism. Comparing themselves too readily to sporting heroes might be an own goal.

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