14 Dec 07
When Gordon Brown took over from Tony Blair as British prime minister earlier this year, he got an overnight raise of about $100,000 a year, increasing the 136,677-pounds salary he earned as chancellor of the exchequer to 187,611 pounds ($375,222).
The hike made Brown one of Europe’s highest-paid prime ministers, but according to research by global consultants Hay Group, he is still lagging when it comes to equivalent leadership positions in the private sector.
The Hay Group survey also found that Brown suffers compared with other government leaders when his pay is related to the size of the job they have to do. Brown’s task in managing the British bureaucracy, the report says, is second only to that facing French President Nicolas Sarkozy.
Sarkozy’s own salary was recently doubled to 240,000 euros ($346,000, or 167,500 pounds) following a vote in Parliament only a few months after he took office.
The Hay Group report said that the British PM earns less than 10% of the salaries that private sector CEOs can expect for performing similar size roles in the U.K. – one of the lowest such ratios in Europe and behind his counterparts in Holland (Jan Peter Balkenende), Finland (Matti Vanhanen) and Greece (Kostas Karamanlis).
Yet size of the country does not always directly equate to the compensation paid to its leader. In a smaller country like Ireland, for example, Prime Minister Bertie Ahern was recently awarded a salary increase that would take his pay to 310,000 euros (217,000 pounds, or $434,000). But the rise, which would have put him at the top of the European pay league for prime ministers, was later deferred by a year.
Philip Cohen, the Hay Group consultant responsible for the research, said, “At senior level in the private sector, a bigger job tends to mean a bigger salary. This is not so to the same extent in government.”
Obviously the leaders’ salary packages don’t take into account things like travel, accommodation and other living expenses, but the Hay Group said the disparity with the private sector is even wider when performance bonuses are taken into account. As CEO of “UK Plc,” the study says, Brown would likely benefit from a bonus that could potentially add as much as 1.5 million pounds to a chief executive’s pay package, depending on performance.
And the comparison is even more stark when set against potential corporate earnings in the U.S.
“The yawning pay gap at the very top level in U.K. government has to be a concern in the long term,” Cohen said. “Faced with salaries potentially running into millions, or a salary of around 180,000 pounds, where will tomorrow’s leaders look to develop their careers, to major corporates or government?”
Nevertheless, politicians of all stripes will say that a calling to public service, the exercise of power and the opportunity to shape their nation’s destiny should transcend considerations of simple financial reward. And, of course, there is the equivalent of the benevolent, “$1-a-year” CEOs.
A week after taking office in 2006, Bolivian President Evo Morales made good on a campaign pledge and cut his salary in half, to just over $1,800 a month. While a symbolic move, designed to make more money available to pay teachers, it had the effect of imposing a pay cut on other members of his government and officials, since no one can earn more than the president.
Many leaders, of course, find a high-profile way of raising money and giving back after their elected career, through foundations or charity work – former U.S. Presidents Bill Clinton and Jimmy Carter, or former Soviet leader Mikhail Gorbachev, for example, as well as sitting Costa Rican President Oscar Arias, while Tony Blair and France’s Jacques Chirac, who both recently left office, are understood to be looking at setting up their own organizations.
Forbes’ recent list of the Richest Royals obviously includes figures who would be considered “leaders” of their countries, but what do citizens pay for elected world leaders?
The U.S. taxpayer gives President George W. Bush $400,000 a year, while his No. 2, Dick Cheney, pulls down $208,575 for being a heartbeat away from leading the free world.
By contrast, Russian President Vladimir Putin’s official salary is just over $81,000, and a recent formal “wealth declaration” showed that his overall asset value had declined during his second term in office.
German Chancellor Angela Merkel, who was named Forbes’ “most powerful woman” for the second straight year, and who recently was critical of excessive executive salaries in the private sector, is paid around $318,000.
In Japan, former Prime Minister Shinzo Abe said last September that he would take a 30% pay cut on his salary of $355,000, and that other ministers would give up 10% cent of their pay.
But the top of the tree by some degree is Singapore Premier Lee Hsien Loong, who, following a controversial round of pay increases, is set to be receiving a salary of $2.05 million by the end of next year. While the rationale for the increase was – as the Hay Group found in its research – the need to keep government salaries competitive, Lee said he would donate his raise to charity