Asian Executives to Earn More Than Those in U.S. By 2013

According to consulting firm Mercer’s global executive pay trends study, executive salaries in Asia will soon surpass those in the U.S. by 2013.

Asian executives are taking home bigger pay-cheques than their counterparts in Europe and by 2013, they will go past the earnings of American top brass too, says Mercer.

Executive pay in the Asia-Pacific region is increasing across the region, especially in China, India, Indonesia, Vietnam, the Philippines and Malaysia.

According to consulting firm Mercer’s global executive pay trends study, executive salaries in Asia will soon surpass those in the U.S. by 2013.

Asian executives are taking home bigger pay-cheques than their counterparts in Europe and by 2013, they will go past the earnings of American top brass too, says Mercer.

Executive pay in the Asia-Pacific region is increasing across the region, especially in China, India, Indonesia, Vietnam, the Philippines and Malaysia.

In 2011, average executive salaries in Asia increased by an average of 7 percent while the vast majority in Europe only experienced an average 2.5 percent increase in executive salaries.

In the US and Canada pay inflation is restrained with 2011 salary increases averaging around 3 per cent, while, in the Gulf Cooperation Council, base salary increases in 2011 range from 6 to 7.5 per cent. For many companies, this will be the first pay increase in two years.

However, the report cautions that inflationary drivers behind remuneration in Asia risk creating a bubble, fraying the link between pay and performance and distorting company salary structures. 

The average annual salary drawn by an executive is $189,809 in Asia, $202,067 in the US and $167,424 in Europe, according to Mercer.

Salary hikes in the West are being restrained owing to poor economic growth and continued pay scrutiny in light of the current Euro-zone, banking and debt crisis, Mercer says in its Global Executive Pay Trends report.

[quote] Historically, executives in western economies have been paid the most but the centre of gravity is moving inexorably East. In 2010, average executive salaries in Asia surpassed those in Europe and we anticipate that they will surpass those in the US by 2013,” Mercer’s Asia Pacific leader for Rewards, Human Capital Hans Kothuis said. [/quote]

The main driver behind this spurt in Asian executive salaries include increased pay restraint in Western Europe and North America, combined with economic growth in emerging markets, accelerating inflation and, crucially, a scarcity of executive talent.

“Companies in the Asia should review their remuneration policies to ensure that they can maintain sustainability and capitalise on rapid changes in technology, trade and financial conditions, as their share of the world economy increases,” Kothuis said.

There are, however, voices of discord from the industry. Aon Hewitt’s report on compensation trends says while the gap in purchasing power parity may reduce, Indian salaries will not overtake the salaries in the US. An Indian CEO, according to the consulting firm, earns $1.4 million per annum, which is far less compared to a CEO in North America getting $8.9 million, and one in Europe earning $6.5 million. However, when adjusted to purchasing power parity, the Indian CEO will make around $5.4 million. 

“On a pure value basis, it will be a long time before an Indian CEO will surpass their western counterparts,” said Anandorup Ghosh, practice head for executive compensation and corporate governance at Aon Hewitt.