In the hot seat: CEO hiring challenges and the debate around remuneration

CEO pay in the online gambling sector hit the headlines once again in recent months with some eye-watering figures making a splash in the press. Bet365 founder Denise Coates, often referred to as the wealthiest woman in UK tech, topped the bill by taking home £260m in salary and dividends in the year to March 2022. To put that into context, her pay packet is 16 times higher than that of the best-paid FTSE 100 CEO Sebastien De Montessus of Endeavour Mining. It’s also over 75 times greater than a typical FTSE 100 CEO and nearly 8,000 times higher than the median UK worker. 

Along with fellow owners, brother John and father Peter Coates, the trio moved up to 16th place in this year’s The Sunday Times Rich List with an estimated fortune of £8.79bn between them. Despite Denise Coates’ pay package having fallen by around £35m on the previous year, she’s still considered to be one of the highest paid CEOs in the world.

Luke Hildyard, executive director of independent think tank High Pay Centre, acknowledges Coates is an unusual case as she’s the firm’s founder and there is an argument to be had that someone who starts a business from scratch deserves to be paid more than a CEO who is a manager of a firm that’s been around for decades or centuries.

He remarks: “She obviously built an incredibly successful business and has demonstrated great creativity, innovation and business acumen to do that. But there are caveats to that. She’s built up a betting empire, but her family business was betting. It’s not like anybody could have built up a giant online betting company and she just happened to be the person to do it. She had huge advantages and insights that enabled her to do it.”

Conversely, Hildyard asks whether that wealth could be used more efficiently. “Rather than making someone who’s already obscenely rich and has more money than they could ever possibly spend, is it efficient for them to accumulate even more, as opposed to paying their staff more, or paying more taxes that can create better schools, better hospitals, better opportunities for other people who might also want to start successful businesses that create jobs?” he poses. Although the Stoke-on-Trent-based operator is already known for supporting local communities, as shown in the company accounts published in January 2023 where charitable donations of £100m were made to the Denise Coates Foundation for the year to March 2022. 

Directors’ remuneration, however, has been the subject of shareholder dissent in recent years. Since 1 October 2013, shareholders have been able to approve listed UK companies’ executive salaries through a vote once every three years in an update to the Companies Act 2003.

FTSE 100 operator Flutter Entertainment’s 2022 annual report detailed that directors’ pay was discussed at last year’s AGM held on 28 April 2022. Resolution 2, an advisory vote to approve the directors’ remuneration report, received 32.45% votes against. A minority of shareholders raised concerns on the level of base salary increases awarded, which saw CEO Peter Jackson’s basic pay rise by a quarter. In response, the operator said: “The remuneration committee considered that increased base salary levels for our CEO and CFO were necessary to ensure our exec director total remuneration packages are representative of Flutter’s business context and remain competitive in both the current UK market and the wider US and international digital markets in which we now operate.”

Under Flutter’s policy, Jackson’s base salary rose 26% to £1.1m from 1 March 2022. Benefits of £7,000, pension of £169,000, annual bonus of £1.1m, long-term incentives of £1.7m and £2.8m of variable pay swelled his total package to £4.1m last year. Although the CEO’s total pay packet fell 45% year on year (YoY) from the £7.3m 12 months prior. As of 1 March 2023, Jackson’s salary rose 4.5% to £1.2m.

Playtech faced similar shareholder revolt against executive pay at its AGM on 30 June 2022, with 30.3% of votes cast against. In its 2022 annual report, the B2B and B2C firm stated a number of shareholders were against the decision to grant a one-off equity share award to the CEO in 2019. It also read shareholders were more comfortable with the policy in 2021, when, following a review and shareholder consultation process, Playtech made significant changes to its remuneration policy, which resulted in a 20% reduction in the CEO’s base pay.

Another example of shareholder power followed Betsson AB CEO Pontus Lindwall’s shock exit in 2021 after 25 years in the business. Lindwall was appointed CEO of Betsson AB in 1998 before moving to a chairman role in 2011, but later returned to the CEO position in 2017. On his return, Lindwall was tasked with overseeing the implementation of the “Back on Track” strategic programme designed to return Betsson to profitability.

At the time of Lindwall’s departure, the board said the programme was complete, citing its record Q2 performance, and that against that backdrop it would “begin the work of searching for the next generation of international leader to further develop Betsson”.

What followed was a strange turn of events as a month later the operator reversed its decision to replace Lindwall following pressure from major shareholders. In a statement, the board of directors confirmed it had annulled its prior leadership change to better equip the business to deal with its US strategy and exiting the Dutch market.

Pay it forward           

So, considering the shareholder unrest in some cases, how are these high levels of pay for business leaders justified? Entain’s 2022 annual report outlined that when setting the package for a new executive director, Entain’s Committee will consider the candidate’s existing remuneration, the market rate for the role and pay no more than is necessary to fulfil the hiring need. This could include relocation expenses such as a housing allowance and school fees, and reflect cost-of-living differences.

Jette Nygaard-Andersen, CEO of Entain, earned a base salary of £820,000 in 2022, a 15% rise on the £708,000 she was paid in 2021. According to Entain’s 2022 annual report published in March, the Dane’s total package amounted to £1.9m last year, including benefits of £36,000, a pension of £49,000 and a £1m annual bonus. However, Nygaard-Andersen’s pay packet was down 24.9% on the £2.53m she received in 2021. By comparison, her package in 2022 is dwarfed by ex-CEO Kenny Alexander’s sum of £19.1m in 2018.

For 2023, Entain announced a 3% salary increase for its executive directors, bringing Nygaard-Andersen’s base salary up to £844,600 from 1 January 2023.

To put some of these salary figures into context, from the start of 2023 it took a typical FTSE 100 CEO just 30 hours to get paid the same amount as a typical UK worker is paid for their annual salary. In what has been coined as ‘High Pay Hour’ by High Pay Centre, this equates to a typical FTSE 100 CEO only needing to work until 2pm on 5 January to earn the equivalent of a typical UK worker’s wage of £33,000.

With whopping bonuses making up a significant chunk of a CEO’s total remuneration, coupled with basic salary, both are proving to be high on a CEO’s checklist. “The short-term prospects of receiving your bonus are strong,” points out Jon Arnold, CEO of executive search and talent advisory firm Arnold Ash Group. As long as a CEO is stabilising the business or its achieving YoY growth, the full bonus tends to be paid out, he adds.

High Pay Centre’s Hildyard tells EGR the median pay of a FTSE 100 CEO has been pretty steady during the last decade. He cites heightened shareholder, media and public interest in top pay as having stopped the huge increases that had occurred in the 1990s and 2000s.

Pay structures have also changed in recent years. Three or four years ago, during the buoyant market, CEOs were prepared to weight their packages in favour of equity and stock, but priorities have since shifted. Arnold says in the last 18 months since the value of businesses has dropped and companies are less likely to move to sale or a liquidity event, the focus has moved.

“CEOs and leaders are trying their best to weight their packages and its elements in favour of higher basic salaries, higher bonuses, so higher fixed remunerations, even on occasion relocating to be more tax efficient or into markets with inflated salaries. For example, the US tends to have about 30% to 50% higher salaries and packages for similar roles. So, there seems to be a migration of talent and this shift towards fixed remunerations.”

Marie Theobald, chief people officer at operator Rhino Entertainment, which owns and operates four brands including its flagship Casino Days, remarks that while pay packages are a sensitive theme to discuss, compensation may vary depending on the size, complexity, level of responsibility and strategic plans of the business. From experience of previously speaking to candidates at this level, equity has become an important part of the package, an element which gives a strong sense of ownership, together with bonuses based on positive company performance. “I do see better incentives in that respect, which are tied to the overall performance of the company,” Theobald adds.

Ben Fried, partner at global executive search and talent consultancy SRI, says participating in value creation is something a CEO will class as essential within their package, as well as base salary, bonus award and other benefits, with the company stage (eg startup, growth, turnaround) influencing the amount of equity they will be awarded.                      

The American dream                     

Over in the US, DraftKings CEO Jason Robins saw a 238% YoY rise in his annual remuneration in 2022. He netted $47.5m (£37.6m) in 2022 compared to 2021’s $14m, according to the company’s proxy statement filed with the US Securities and Exchange Commission (SEC).

The vast majority of Robins’ remuneration was in the form of performance-based restricted stock awards of $43.7m while his base salary fell from $112,500 in 2021 to a nominal $1 in 2022. The remainder of his pay package consisted of $1.4m from the group’s non-equity incentive plan and $2.3m in compensation.

Having equity in a business still holds importance for CEOs as part of their remuneration but less so in the current market, explains Arnold. “However, it’s essential to a CEO to feel they have a vested interest in the success of the business. And at times, some incoming CEOs want to buy into the business so they have even more skin in the game.”

In May, a study released by research firm Equilar found that median pay for top US CEOs rose 7.7% last year to a record $22.3m, boosted by big stock awards which leapt 19.7% to $13.8m for 2022. The Equilar 100 2023 edition featuring the 100 highest-paid US CEOs ranked DraftKings CEO Robins in ninth place with total compensation standing at $47.5m, and the only gambling boss to feature in the list. Peloton Interactive’s CEO Barry McCarthy came out on top with a pay package of over $168m. All pay components increased last year for those US CEOs in the list, but cash bonuses were down by 5.9% in 2022 to $4.2m, attributed to economic uncertainty.

The Equilar 100 2023 saw eight women placed among the highest-paid CEOs (nine on last year’s list), earning a median total compensation of $21.2m. Although no female chief made the top 10 this year, Julie Sweet, CEO of Accenture, was the highest-paid female CEO, ranking 15th with total compensation of $33.7m in 2022.

Over in the UK, a 2022 report by High Pay Centre and national trade union centre TUC found that FTSE 100 CEO pay increased 39% from £2.46m in 2020 to £3.41m in 2021. Median CEO pay was a staggering 109 times that of the median UK full-time worker in 2021 (£31,285), up from 79 times in 2020 and 107 in 2019.

While these statistics make for bleak reading for the average UK worker, High Pay Centre’s executive director says most people accept that CEO roles are more demanding, with longer hours and requiring a higher level of skills/education and should therefore be paid more. But Hildyard says looking at the top 1% of earners in the UK who earn £150,000, they’re already five times better off than the typical UK worker. “So £3m to £4m [pay for a FTSE 100 CEO] is many, many times more than what you need to incentivise or reward success. It’s much more even than somebody on the threshold of the top 1%. I think it’s understandable that people think concentrating so much income on single individuals rather than sharing it more evenly is excessive, wasteful or inefficient,” he illustrates.

The highest paid FTSE 100 CEO in 2021 was Endeavour’s De Montessus at £16.85m, while Jackson of Flutter was ranked eighth at £8.4m. Ninety percent of FTSE 100 companies paid their CEO a bonus in 2021 compared to 64% in 2020 and 89% in 2019, rising from £828,000 in 2020 to £1.43m in 2021.

The aforementioned High Pay Centre report also reviewed pay for FTSE 250 companies and found the median CEO pay stood at £1.72m in 2021, a rise of 38% on the £1.25m in 2020, fuelled by the recovery in economic activity in 2021 following disruption caused by Covid-19.

The highest paid CEO in the FTSE 250, self-storage company Safestore’s Frederic Vecchioli, received a sum of £17.06m in 2021, while Playtech CEO Mor Weizer was third with pay of £9.15m.

Money talks 

Both surveys clearly show the gap in pay between UK and US CEOs, with the latter earning higher salaries and paying out astronomical bonuses in some cases. Arnold notes that during the buoyant market and when the US was starting to regulate, a large proportion of industry leaders were looking at the opportunities there. Migrating talent from the UK to the US is not easy in terms of visas/green cards but now the switch has reversed. He adds: “There’s been a shift back to the traditional businesses in and around Europe which are centred around profit-making operations. The US is seen less as a gold rush and more of a medium to long-term prospect, as a lot of the US-led businesses have been focusing on market share and are not yet in profit.”

Rhino Entertainment’s Theobald says that while she’s had no direct experience working with a US company, salaries in most industries in the US tend to be higher than those in Europe for various economic reasons and due to cultural differences. “With several US acquisitions going through, we will probably see US salaries impacting EU leadership teams at some point. That will most certainly have a ripple effect on the industry in general in the medium or longer term, not only in terms of compensation but potentially in terms of culture and ways of doing business,” she expresses.

For the sectors that SRI focuses on, namely sport, media, entertainment, consumer and technology, Fried agrees CEO compensation is generally higher in those fields in the US than the UK. “A much larger market size and competitiveness, more overt stakeholder capitalism, a US CEO celebrity culture as well as tax and regulatory differences all play a part in why boards offer US CEOs larger packages than the UK,” he explains.

In May 2023, Julia Hoggett, CEO of the London Stock Exchange, warned UK CEOs are paid too little by global standards. She claimed UK-listed firms are struggling to keep up with US rivals who often pay three or four times that of UK companies. Without increasing pay, she cautioned the UK will struggle to remain an attractive location for businesses.

Writing on the LSE site, Hoggett shared: “[…] This talent objective is hampered by the advice and analysis of the proxy agencies and some asset managers voting against executive pay policies even when those pay levels are significantly below global benchmarks. Often, the same proxy agencies and asset managers that oppose compensation levels in the UK support higher compensation packages in different jurisdictions, notably in the US. This lack of a level playing field for UK companies is often not discussed or, if it is, the downside risks to our companies, economy and competitiveness are not part of the conversation.”

In response on its blog, High Pay Centre said it is “unconvinced of the business case or the moral case for increasing executive pay”. Hildyard tells EGR Hoggett’s comments imply the number of people who can do these jobs is fixed and tiny and that they’re uniquely skilled and irreplaceable, which he rebuffs. “I don’t think people are born with an innate ability to be CEOs of betting companies. They need to be trained up and given the experience, confidence, opportunities and skills to do that.”

The second point he brings up is what makes a company successful. In some cases, you can clearly say it was an entrepreneurial CEO driving the company forward with the force of their personality but for large companies with operations on multiple continents, thousands of employees and that are heavily regulated, it’s a totally different kettle of fish.

“Whenever the CEO takes a decision, and it might be a decision that alters the value of the company for better or worse by billions of pounds, they’re going to have lots of advisers assisting them with the decision and then they depend on their colleagues to execute it. So, the idea that it’s all down to the CEO and if we pay CEOs more, we’ll get better CEOs and thus better businesses and a more prosperous economy, doesn’t seem quite right to me,” he replies.

Hildyard also makes the point that it’s about creating a good environment for a business and ensuring customers have enough money to spend throughout the economy. “If you’re a company that operates in the UK, then UK consumers need money in their pockets to spend on betting or in supermarkets etc. That depends on ensuring that not just the CEO but managers, indeed all staff throughout the company, are well trained, confident and provide good customer service.

“I think the idea that just lavishing a few more million on the top people and then they’ll somehow bestow prosperity on the rest of us is limited and short-sighted,” he boldly asserts.

Recently, there’s been a transfer of talent happening with execs from entertainment, streaming media and e-commerce entering gambling for the first time and senior igaming staff moving out. In the last five years, we’ve seen CEOs exit the gambling sector entirely (but not necessarily over pay) such as Henry Birch who left Rank Group in May 2018 for The Very Group, ex-Paddy Power Betfair CEO Breon Corcoran joining WorldRemit in October 2018 (after having left the Irish operator in January 2018) and Richard Flint departing Sky Betting & Gaming in June 2019 and now acting as an investor.

Arnold of Arnold Ash Group references the US duopoly of DraftKings and FanDuel as an example. “So, if you’re going to join a business like that as a CEO, then the salaries might compare to an Amazon, Meta, eBay or a Google. However, those opportunities are few and far between,” he explains. “I think that’s one of the main reasons why we do have this migration of talent out of the industry because you could get a head of department or SVP role in one of these huge businesses in the US where the salary is probably similar to that of a medium-sized CEO in the gaming market.”

Having worked in hospitality herself, Theobald knows sectors such as those do not pay as favourably but she acknowledges banking and technology may pay equally or even better than gaming. “It depends on the size of the company as well as its complexity. Gaming-wise, while the pay packages of the C-level team are at a healthy level, I can’t say they’re substantially higher than the other industries I’ve worked in,” she says. 

Leading the way

The research carried out by High Pay Centre and TUC last year highlighted there were nine female FTSE 100 CEOs in 2021, up from seven the previous year. It found the median single figure of remuneration for a female CEO was £3.01m compared with £3.49m for a male FTSE 100 CEO. However, it did note the very small sample size of female CEOs renders pay comparison less meaningful.

Highlighting bet365’s Denise Coates and FanDuel CEO Amy Howe as standout female leaders in gaming, Fried tells EGR that by encouraging networking and publicly championing gender diversity, female representation will improve. “The main factor is a male-dominated past in the industry, but it is changing. The larger operators and suppliers are promoting diversity and inclusion, implementing sponsorship and mentor programmes, offering leadership development programmes, allowing for flexible work arrangements, trying to combat unconscious bias, and engaging in targeted recruitment and talent acquisition.”

In the past, when recruiting for a new CEO, Theobald says out of 10 candidates there would be a maximum of one or two females. “At the time, I wasn’t particularly looking at candidates who were already CEOs,” she recalls. “I was looking at candidates who were at C-level and ready to take that next step but the number of female leaders is still limited. Until we start addressing that level, then it’s going to be much harder to tackle female representation at the CEO level.”

When posed with the question of what the gambling industry can do to attract more women into senior leadership roles, Theobald suggests that while it is essential for businesses to keep up their efforts to ensure women are attracted to these roles, one should also consider changing the question to how many women want to take on that responsibility when they also have a high level of responsibility in their personal life. “Society’s progress is there but it’s slow moving, meaning that many women carry a lot of the responsibility outside the world of work, especially the ones who have children. So, how many women really want that huge responsibility at home and that ultimate responsibility in the workplace?”

Arnold believes we’re seeing more women coming through as a meritocracy into leadership positions in gaming. “I think for the last 10 years, more females have entered the industry and management positions. So, I think another 10 years from now, we’ll see another seismic shift in female leadership. I really do think it’s a matter of time.”

A hire power

In the last few months, EGR Power 50 operators 888, Kindred Group and Pinnacle have found themselves on the hunt for a new boss. Not only have they lost leaders with considerable experience and length of service but also personalities that are well known within the gambling sphere.

The first sign of a mini exodus began in January 2023 when 888’s CEO Itai Pazner left the operator in a shock exit that coincided with the immediate suspension of its VIP activities in the Middle East due to compliance issues. The Israeli, who had been with the company for 22 years, is a prime example of someone working their way up the ranks from a marketing manager when he first joined 888 in 2001 to CEO in 2019.

In May, Pinnacle CEO Paris Smith stepped down from her role after 17 years to transition to an advisory position within the company. Just a few days later, it was announced that Kindred Group CEO Henrik Tjärnström had resigned after more than 13 years at the helm of the Stockholm-listed operator. Having originally acted as a non-executive director for Unibet Group between 2003 and 2008, he became CFO and deputy CEO in March 2008 before landing the top job in July 2010.

With those vacancies still yet to be filled, recruiting a CEO isn’t just about offering an attractive package. It can be a complex and drawn-out process to find the right candidate. Typically, it will be a confidential search, regardless of whether it’s a privately or publicly owned business. The timeline of events includes identification and attraction of the top talent. After identifying who is available and interested in the opportunity, it’s down to attracting them to the role, which Arnold discloses is the hardest part. “Why should they join? What’s the opportunity? What’s the strategic roadmap? What’s the end game? And are they the right person to lead that strategy and vision, and achieve those objectives?”

There may be several interview stages and processes involved with board members and third-party consultants. After an offer is made, there will be a contractual negotiation usually involving lawyers due to the seniority level of the role.

Once an agreement has been reached, due to notice periods and/or non-compete clauses, the timeframe for a start date can range from two to 12 months at this level. There is, however, also the option of implementing an interim solution during that time period.

Recruiting the right person for the CEO position is of utmost importance, Theobald tells EGR. It is essential to find an individual who not only fulfils the expectations and goals set by the directors and founders but also ensures the satisfaction of all stakeholders, including the employees, particularly through the culture they build and the tone they set. The founders’ vision might require a CEO capable of leading a transformative change, who is able to positively disrupt it. Alternatively, the founders might seek a CEO who can leverage the company’s foundation and further build upon it.

Theobald describes the recruitment of a CEO as being “quite intense” and starts with a clear identification of the essential qualities and knowledge required for the business, and its growth plans. The process itself may include multiple interviews across different stakeholders including the board of directors, founders and members of the C-level team, together with case study presentations and profiling exercises.

A number of CEOs have entered the online gambling space with no prior background in gambling, such as Entain’s Nygaard-Andersen and Flutter’s Jackson and Ian Brown, who have brought transferable skills with them from the world of entertainment, banking and travel, respectively. Yet Fried stresses the importance of having industry knowledge. “Typically, gambling CEOs are currently coming from within the industry as there is a perceived knowledge gap if you come in from an adjacent or completely separate industry. Subject matter areas such as regulation and compliance, specific industry knowledge and dynamics as far as customer behaviour and operational differences are concerned, as well as the requirement to have an industry network and relationships, all play a part in why the gambling industry tends to promote from within,” he remarks.

With execs moving in and out of the sector, Arnold warns operators to place just as much focus on retention as recruitment. “We need to make sure the igaming industry remains competitive in terms of being cutting-edge, interesting and innovative. That’s where I think we need to act as one as an industry, and try and protect and retain the best talent.”

While the halcyon days of staff moving up the ranks still do exist, such as the likes of former Flutter UK and Ireland boss Conor Grant who originally joined Paddy Power’s graduate scheme in 1998 and became CEO in 2020, these examples are becoming less prevalent. Arnold explains: “Now there are many, many people that have fast tracked their careers due to a meritocracy or just being an innovator and having great ideas. You only have to look around the Fortune 500 and see how many entrepreneurs there are founders and CEOs in those lists. DraftKings is a good example of a bunch of relatively inexperienced people (from an igaming perspective) who had a good idea and grew their business exponentially.” He expects that trend to continue as we see staff become business leaders after a fairly short stint in the industry.

For Kindred Group, 888 and Pinnacle, which are all on the search for new CEOs, each business has to base the decision on its own circumstances in terms of how long it can wait for the right person, how it should go about searching for that individual and what ‘good’ looks like. Arnold recommends placing high importance on the retention of quality staff within a business as they are the succession plan.

“Ultimately your business is only as good as the people in it and the cost of not having great leadership outweighs salaries or recruitment fees. The cost of not having a great leader is potentially hugely impactful to your bottom line, to your profit and loss, and to your medium and long-term value and strategy.”

With a handful of CEO roles still vacant, the tussle for talent continues.