FINTECH SALARIES
Careers Fintech Weekend Read

Fintech CEO Salaries: Are Leaders Being Paid Too Much?

Fintech CEO salaries came under the spotlight this week when it emerged that the pay packet of Klarna CEO and co-founder Sebastian Siemiatkowski increased by 35 per cent to £1.05million in 2022, despite the Swedish buy now, pay later firm making the biggest loss in its history of £830million.

Justifying the salary increase, Klarna said its remuneration policy was aligned with other tech firms “in order to hire and retain the best talent”.

Fintech is a broad church these days, so it’s difficult to say whether Siemiatkowski’s salary is particularly high or make telling comparisons among CEO salaries.

Some fintech CEO salaries
Anne Boden, CEO, Starling Bank
Anne Boden, CEO, Starling Bank

As a comparison, the highest paid director at neobank Starling, assumed to be CEO Anne Boden, took home £1.02million in base salary in 2022; publicly listed payments firm Wise CEO Kristo Käärmann receives a salary of £197,000 a year.

Meanwhile in the US, Robinhood CEO Vladmir Tenev was the highest-paid CEO in US financial services in 2021, bagging a total pay packet of £661million, driven mainly by stock grants.

These salary levels are a far cry from those CEOs of fintechs at the seed stage, who are also often founders, who sometimes take home a nominal salary or even forgo a salary altogether.

“Rewarding CEOs for bad corporate performance may also convey to workers the wrong message that subpar work performance is acceptable or even encouraged”

Are fintech CEOs overpaid?

So are fintech CEOs, generally speaking, overpaid? Katherine Farquharson, director of Storm2, the fintech recruitment agency, said it depends on several variables.

She said: “If there is high demand for specific skills that CEOs have that are difficult to find in candidates, then CEOs pay will naturally be higher following the law of supply and demand.

“Secondly, high remuneration is arguably deserved if the CEO can make the fintech outstanding, achieve excellent financial performance, and propel the company’s growth.”

She adds: “However, I do recognise that some may argue that CEO pay in fintech has risen too high in comparison to the ordinary worker’s wage (especially if the fintech is not doing so well).

“Perhaps the better question would be: ‘Are fintech CEOs paid too much in comparison to the rest of the employees in their respective companies?’”

Recruiter “surprised” at poor remuneration of fintech execs
Andrew Cook, group head of client services at recruiter Headcount,
Andrew Cook, group head of client services at recruiter Headcount

Andrew Cook, group head of client services at recruiter Headcount, who has long-standing recruitment experience in traditional finance, says he is “surprised” by how poorly most disruptive industries’ remuneration packages in the UK are compared to traditional finance.

He adds: “I don’t think that the UK sector [fintech] is yet on the same standing comparatively  as it is in say Germany and in the Netherlands and increasingly in Southern Europe.”

For example, he says you are more likely to see senior executives in Germany move from a traditional finance company or say a Mercedes to neobank N26 than you are for a similar type move in the UK.

He adds: “I thought there would have been a lot more transference and fluidity between traditional financial services into the disruptive world and there hasn’t been.”

Cook says this is partly attributable to scale-up businesses not being able to compete with established businesses on overall pay packages. Generally speaking, CEOs of established fintechs tend to be paid significantly less than FTSE 100 CEOs, where the average CEO salary is £3.6million.

For example, the CEO of HSBC Noel Quinn was paid £5.6million in 2022 and once long-term incentive awards are included, Quinn’s total pay could reach £10.5million, the bank said.

Fintech CEOs paid in a variety of ways

Like other industries, fintech CEOs are paid in a variety of ways including base salary, bonuses, stock options and other benefits.

But depending on the fintech’s size, stage of development, and other variables, the exact pay structure will differ between fintechs.

Farquharson says: “CEOs in the fintech sector are frequently paid handsomely compared to CEOs in other sectors, especially for startups. This is due to the fact that fintechs and high-potential companies are growing rapidly and need experienced and qualified CEOs to successfully negotiate the complex regulatory environment and compete in the crowded market.”

Cook says: “I certainly think the more established, the more commoditised, the more corporate businesses generally pay better across the board.”

Case study
Amit Patel, the CEO and co-founder of health insurtech Peachy
Amit Patel, CEO and co-founder of health insurtech Peachy

One example of a startup CEO who has taken a pay cut to try and make his dream a reality is Amit Patel, CEO and co-founder of health insurtech Peachy, which launched in the FCA Sandbox last year.

Patel was previously earning significantly more than his £150,000  base salary a year as a senior executive at Bupa but jacked it in to set up Peachy, where he and his two other co-founders are now earning between £50,000 and £75,000 a year.

Patel says: “It is a constant tussle. Whether that is the right thing or not to do is a very individual decision I think based on the business and people’s individual circumstances as founders.”

Before a near £1.5million investment injection last year, the startup was effectively being bootstrapped, with non of the founders taking a salary and Patel consulting on the side to help support his family. Patel, who has a mortgage and three children in private school, says he has had to make several sacrifices to try and fulfil his dream.

“One of the non-negotiables is that my kids were not going to be taken out of private school,” he says. “We have halted renovation of our house, we don’t go on holiday as much, we used to do three holidays a year minimum and not worry about the cost whereas now Eurocamp once a year is more in keeping with what we do.

“We don’t eat out much more, we watch bank balances and expenses and track that much more religiously across the months. The kids don’t get anything that absolutely essential and necessary for their lives.”

Patel says he and his co-founders, who are the majority owners of the startup, could grant themselves s a salary hike should they sign commercial deals or potentially negotiate a salary rise if they give up more equity in the startup during the next fundraise.

Despite the challenges, he is convinced he has made the right decision and the long-term benefits should Peachy be successful are enticing.

“I might never get to my Bupa salary but I never had any equity in Bupa,” he adds.

Internal metrics key

Patel thinks that it’s shareholders, being the owners of the company, who ultimately should decide fintech CEO salaries.

He adds: “People are very quick to judge salaries on company performance. But it’s what internally being set and if internally the metrics and hurdles have been surpassed, then it’s absolutely right to give that CEO the pay rise.”

But in the case of Klarna, he says “it is odd”  that its CEO has received a pay hike given the widening of its losses. He says, in the current age of transparency, firms should explain to their customers the rationale for pay hikes, disclosing internal metrics.

Pay hikes for “subpar” performance are a no
Katherine Farquharson
Katherine Farquharson, director of Storm2

Farquharson says that giving CEOs a pay rise for ‘subpar’ performance is not something she would recommend.

She says: “A CEO’s compensation package should be dependent on their performance (like with most other professional positions) and the financial success of the company, in order to motivate them to strive towards accomplishing the firm’s goals.

“Rewarding CEOs for bad corporate performance may also convey to workers the wrong message that subpar work performance is acceptable or even encouraged but could also lead to disillusionment amongst the rest of the workforce if the same rewards are not shared across the board.”

 

 

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