Opinion Piece: Executive Pay In Crisis: Rethinking Rewards In A World On Edge

Navigating the New Era of Executive Remuneration: Challenges and Solutions in a Turbulent Global Landscape – Insights by Dr Chris Blair

The world of executive remuneration is a battlefield, and the stakes have never been higher. With global trade tensions, geopolitical conflicts, and societal demands for fairness, boards are under pressure to rethink how they remunerate their top leaders. From tariffs and trade warfare to the wars in Ukraine and Palestine, the global landscape is shifting rapidly, impacting corporate profitability and public perception. Add to this the growing wage gap, the fierce competition for top talent, and the integration of Environmental, Social, and Governance (ESG) metrics into corporate scorecards, and you have a perfect storm. So, how can organisations navigate these choppy waters while ensuring fairness, performance, and sustainability? Let us explore the key challenges and propose solutions, grounded in the latest research and trends, with a dash of pragmatism and humour—because if we can’t laugh at the absurdity of a CEO’s bonus being larger than a small country’s GDP, what can we laugh at?

The Global Backdrop: A Perfect Storm of Change

The global economy is in flux, and executive remuneration is feeling the heat. Tariffs and trade warfare, particularly between the US and China, have disrupted supply chains, with the Executive Compensation in Times of Uncertainty report noting that these measures may lead to reduced consumer spending and fluctuations in interest and exchange rates (Southlea Group, 2025). The wars in Ukraine and Palestine have driven up energy costs and inflation, further squeezing corporate profits (Smith, 2023). Meanwhile, the wage gap is a gaping chasm; for example, the average Group CEO in South Africa can earn up to 8.12 million USD annually, while semi-skilled workers earn as little as 1,220 USD. This disparity fuels public outrage and calls for pay restraint, governance, and compliance.

The war for top talent is another pressure point. As Brown and Armstrong (2024) note in The Renaissance and Refashioning of Skills-Based Pay, labour shortages in the UK, exacerbated by Brexit and the pandemic, have intensified the demand for skilled executives. Yet, performance-related pay, once the darling of remuneration committees, is under fire for encouraging short-termism (Frydman and Jenter, 2010). The inclusion of ESG in corporate scorecards adds another layer of complexity, with Cregan et al. (2025) warning that linking pay to ESG ratings can be problematic due to their unreliability. Finally, the push for equal pay for work of equal value and stricter governance requirements, as outlined in the UK Corporate Governance Code, is non-negotiable (FRC, 2024). Let us break down these challenges and explore solutions that don’t involve a magic wand, though we might wish for one.

Key Challenges in Executive Remuneration

Tariffs and Trade Warfare: The Profitability Squeeze

Tariffs, such as those imposed by the US on Chinese imports, have hit corporate margins hard (Brown, 2024). The Executive Compensation in Times of Uncertainty report warns that this volatility may lead to reduced share prices, making it harder to justify high executive pay when shareholders are seeing smaller returns (Southlea Group, 2025). Boards are left wondering: how do you reward a CEO for navigating a storm they did not create?

Geopolitical Conflicts: A Risky Business

The conflicts in Ukraine and Palestine have introduced new risks, from supply chain disruptions to soaring energy prices. A study by the Institute of Directors found that 68% of UK shareholders believe executive pay should reflect broader economic conditions, not just company performance (IoD, 2023). It’s a fair question: should executives be sipping champagne while the world grapples with crises?

The Wage Gap: A Growing Divide

The wage gap is stark. In the UK, the High Pay Centre reported that the average FTSE 100 CEO earned 109 times the median worker’s salary in 2022 (High Pay Centre, 2023). This disparity erodes trust and morale, making it harder to foster a unified workforce. As one HR director quipped, “It’s tough to preach teamwork when the CEO’s bonus could fund a small nation.”

The War for Top Talent: A High-Stakes Game

The competition for top talent is fierce. Brown and Armstrong (2024) highlight how UK employers are using skills-based pay (SBP) to attract and retain talent, with 48% of companies in the World Economic Forum’s survey prioritising progression over higher wages (WEF, 2023). However, spiralling remuneration packages risk shareholder backlash, leaving boards in a bind.

Performance-Related Pay: A Double-Edged Sword

Performance-related pay is under scrutiny. Greene (2024) argues that while it works for roles with tangible results, like sales, it can lead to short-term thinking in management, especially when tied to financial metrics alone. Frydman and Jenter (2010) echo this, noting that it often prioritises quarterly earnings over long-term sustainability—a risky move in today’s ESG-focused world.

ESG Integration: A Noble but Tricky Goal

ESG metrics are increasingly part of remuneration, with only a 10% weighting in long-term incentives (LTI). However, Cregan et al. (2025) caution that ESG ratings are often unreliable, with divergences across providers like MSCI and CDP, and open to manipulation. It is like trying to measure the wind with a broken anemometer—well-intentioned but flawed.

Pay Restraint, Governance, and Compliance: The Watchful Eye

Regulators and shareholders are demanding transparency. The UK Corporate Governance Code requires justification of executive pay relative to overall employee remuneration (FRC, 2024). There is a need for robust board performance, with selection criteria focusing on expertise and reputation, not political connections. Compliance is a tightrope—too much restraint, and you lose talent; too little, and you lose credibility.

Equal Pay for Work of Equal Value: A Moral Imperative

The push for equal pay is gaining traction. The Fawcett Society reports that women in the UK earn 14.9% less than men on average (Fawcett Society, 2023). Boards must distinguish between pay equality (identical pay for identical jobs) and pay equity (allowing variations for productivity factors), noting that perceived equity impacts employee satisfaction. Boards must ensure fairness across all levels, not just the C-suite.

Charting a Path Forward

Navigating these challenges requires a balanced approach. Here are practical solutions to ensure executive remuneration is fair, sustainable, and aligned with today’s realities.

Align Pay with Broader Economic Realities

Boards should tie executive pay to economic conditions. The Executive Compensation in Times of Uncertainty report suggests using structured discretion, reviewing performance quarterly, and adjusting payouts if external factors like tariffs impact results (Southlea Group, 2025). This ensures executives share the burden—and the benefits—with stakeholders.

Move Towards a Living Wage

To address the wage gap, companies should prioritise a living wage for all employees. There is also a global wage disparity, with countries like Nigeria at $68 USD monthly compared to Luxembourg at $2,140. A living wage ensures basic needs are met, reducing inequality and boosting morale for the country that people live in. It is a small step for boards but a giant leap for fairness.

Redesign Performance Metrics

Performance-related pay needs a reboot. Greene (2024) suggests a hybrid approach, combining job-based, person-based, and results-based pay to suit different roles. For executives, include long-term metrics like ESG targets and innovation, with financial performance weighted at no more than 50% of bonuses (McKinsey, 2023). This encourages sustainable decision-making over short-term gains.

Integrate ESG Meaningfully

To make ESG work, use objective metrics, not ratings. Cregan et al. (2025) recommend focusing on measurable impacts, like GHG emissions reductions for airlines or lending in sustainable sectors for banks. Transparency is key—publish these metrics in annual reports to build trust.

Strengthen Governance and Transparency

Robust governance is essential with independent remuneration committees with diverse expertise. Regular audits of pay practices, especially for equal pay compliance, can address disparities early (FRC, 2024). Transparency in decision-making ensures accountability.

Balance Talent Attraction with Retention

To attract talent without breaking the bank, offer non-financial incentives. Brown and Armstrong (2024) note that 48% of companies prioritise progression over higher wages. Long-term equity plans, flexible working, and career development can align executive interests with company success while keeping costs manageable.

A Call for Courageous Leadership

Executive remuneration is a complex puzzle, but it is one we must solve. By aligning pay with economic realities, ensuring a living wage, redesigning performance metrics, integrating ESG meaningfully, strengthening governance, and balancing talent attraction with retention, companies can create a framework that is fair and sustainable. It is not easy—boardroom debates will be fiery, and shareholders will be vocal—but the payoff is a more equitable, resilient organisation. As the great philosopher, Douglas Adams, once said, “Don’t Panic!” Let’s tackle this challenge with clarity, creativity, and a commitment to doing what’s right.

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