CEO Pay Differences Between US and Non-US Firms: A New Longitudinal Investigation

Abstract

Research Question/Issue

Public and academic debates typically portray US CEOs as exceptionally well paid. Yet, evidence on the existence and magnitude of a US CEO pay premium is mixed and dated. This study uses an expanded, longitudinal dataset to identify whether such a pay premium exists and explores potential differences across countries, time, and governance and institutional contexts.

Research Findings/Insights

Using a dataset of over 42,000 firm-year observations from 34 countries during 2001–2018, we document a persistent but heterogeneous US CEO pay premium. Compared with non-US peers, US CEOs receive 23% more total pay and 20% more equity-based compensation, on average, particularly in comparison with CEOs in non-G7 versus G7 countries. Propensity score matching confirms that the results are not driven by systematic firm differences, and analyses of top earners show that these outliers amplify but do not generate the premium. Say-on-pay rules reduce overall pay gaps but intensify the equity-based share. Internationalization raises CEO pay levels, whereas “Americanization” (i.e., US ownership, directors, and cross-listings) boosts both total pay and equity incentives, especially among non-G7 firms. Cohort and time-series analyses reveal convergence in total pay for more recent IPOs and years, but equity-based premiums remain consistently positive.

Theoretical/Academic Implications

These findings advance the executive compensation literature by showing that the US CEO pay premium is neither universal nor static but contingent on the comparison group, timeframe, and governance environment, pointing to the need for theories that account for these sources of variations. Despite the growing popularity of US-style equity incentives, the observed equity premium indicates that stock-based pay remains a defining feature of American compensation relative to global peers.

Practitioner/Policy Implications

For boards and investors, our findings highlight the importance of contextualizing CEO pay benchmarking and scrutinizing outlier contracts. For policymakers, say-on-pay rules create disadvantages for cash-and-bonus pay but favor equity-based pay in the United States only; The opposite effect occurs elsewhere. Finally, as pay practices across G7 economies converge, the gap with non-G7 countries persists and could have important implications for cross-border competition for executive talent.