Sofia Khaira is a prominent voice in diversity, equity, and inclusion, specifically focusing on how talent management structures affect corporate culture and executive compensation. As an HR expert, she brings a critical eye to the shifting landscape of CEO rewards and the growing influence of American benchmarks on European boardrooms. Her work often highlights the friction between massive financial incentives and the actual delivery of shareholder value, especially as businesses navigate ESG mandates and gender representation in the C-suite. In this discussion, we explore the widening pay gap fueled by US comparisons, the inefficiency of short-term bonuses, the stagnation of diversity goals within incentive plans, and the gradual rise of women in top leadership roles across Europe.
How does the decision to benchmark executive compensation against US competitors fundamentally alter the pay structure and equity within European organizations?
When a European company looks across the Atlantic to set its salaries, the internal pay hierarchy undergoes a massive shift that is difficult for employees to ignore. Specifically, we see the CEO-to-employee pay ratio jump from a median of 47 times to a staggering 80 times when US peers are included in the mix. This sharp rise in median European CEO pay—which climbed 12% just last year—is heavily driven by this “importing” of American standards into a societal and economic context where they don’t naturally fit. It creates a noticeable disconnect where the executive is compensated at a level that feels alien to the rest of the workforce, potentially straining the internal culture and the sense of shared purpose within the firm. Boards are essentially trying to bridge a gap that may not need to be bridged, pushing European packages upward mainly through larger long-term incentives that don’t always align with local market realities.
Given that long-term incentives have grown by 41% since 2016, what are the risks for boards that grant packages significantly exceeding an executive’s base salary?
The data suggests a clear “more isn’t always better” reality, as grants exceeding 200% of a CEO’s base pay are actually linked to lower three-year shareholder returns. This serves as a significant warning to investors and boards who believe that massive payouts automatically secure future prosperity. In the UK alone, we have seen the median total remuneration hit €6.07 million, which represents a 68% increase over the last decade, yet these inflated packages do not always correlate with better performance. It is a precarious balance because if the incentive is too large, it might lead to short-sighted decision-making that doesn’t actually benefit the company’s long-term health or shareholder value. When the incentive structure becomes this top-heavy, it often fails to deliver the lasting value that boards promise their stakeholders.
In terms of performance metrics, why do you think many boards are struggling to design KPIs that truly reflect a company’s strategic priorities?
There is a concerning trend of “copying and pasting” market practices rather than tailoring incentives to a company’s specific needs and unique challenges. We often see boards using the same financial KPI for both short-term and long-term incentives, effectively rewarding an executive twice for the exact same outcome without requiring additional strategic growth. While 80% of companies rely on accounting measures like profit and cash flow, these metrics often add unnecessary complexity without proving they deliver any extra shareholder value. In Germany, for example, the median base pay of €1.40 million is already 22% above the European benchmark, yet the layers of overlapping financial targets on top of that base can obscure what the company is actually trying to achieve. Boards need to move away from these redundant measures and look for KPIs that express real strategic priorities rather than just assuming bigger rewards produce better results.
While climate change targets are increasingly common in incentive plans, diversity goals have seen a recent decline; what does this shift suggest about corporate priorities?
It is striking to see that diversity targets in long-term incentive plans have fallen from 14% to just 8% since 2023, even as climate targets remain robust in about 47% of companies. This suggests that while environmental issues have become a non-negotiable part of the corporate agenda, social equity goals might be losing their momentum or being treated as a secondary concern in the boardroom. In places like France, climate targets for short-term incentives are as high as 70%, which is nearly double the European average, but the weighting for all non-financial targets combined still only sits at 18%. If we only prioritize the “E” in ESG and let the “S” slide, we risk creating a corporate culture that is environmentally conscious but socially stagnant. We need to see a more balanced approach where diverse leadership is valued just as much as a reduced carbon footprint.
With the proportion of female CEOs rising to nearly 10%, how do you interpret the finding that there is no statistically significant pay gap between male and female leaders in these roles?
Seeing female representation at the CEO level grow from 3.7% in 2016 to 9.6% as of 2025 is a positive trajectory, particularly in the UK where it has reached 12.5%. The fact that there is no significant difference in remuneration between men and women—once you account for company size and performance—is a major victory for pay equity at the highest levels of business. Even in Germany, where female representation is slightly lower at 7.7%, the focus remains on ensuring that these leaders are compensated fairly based on their impact. This data suggests that when women do finally break through the glass ceiling, the structural mechanisms are largely in place to ensure they aren’t being penalized for their gender in their paycheck. However, the challenge remains in the pipeline, as reaching 10% representation is still a long way from true gender parity in the C-suite.
What is your forecast for the evolution of executive pay structures in Europe over the next few years?
I anticipate a period of “simplification” as boards finally realize that overly complex pay packages, which have risen 48% since 2016, are simply not delivering the promised shareholder value. We will likely see a move away from the massive long-term incentive grants that currently dominate, especially as the link between high-level short-term bonuses and actual performance remains unproven. There will be a stronger push for non-financial targets to carry more than their current 18% weighting, as investors demand more accountability on climate and social metrics. Ultimately, the pressure to benchmark against US firms will face more resistance as European companies try to reclaim a compensation model that better fits their specific economic landscape and focuses on sustainable, long-term growth rather than just matching American numbers.
