The salary report: Mexican CEOs earning more than global counterparts, workers pay lags behind.

Top executives are paid more in Mexico than in almost any other country in the world, according to a report by Towers Perrin, the global management consultants. Even so, another study says, bosses here have only just recovered the purchasing power they enjoyed before the peso crash almost a decade ago.

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At US$960,759, the average "total compensation package" (salary and benefits) of the chief executive of a company in Mexico is about US$6,000 ahead of that of his counterpart in Germany, according to Towers Perrin. The difference with Spain is even more startling: equivalent CEOs there earn an average of US$620,080 a year. The Towers Perrin findings were based on companies with revenues of some US$500 million a year and included perquisites.

Mexico's top businessmen also earn much more than their Latin American counterparts. But perhaps the biggest surprise in the study is the huge lead that Mexican execs enjoy over Asian powerhouses. Japanese chief executives of comparable companies earn less than half (US$456,937 a year) the salaries of their counterparts in Mexico. As in most other areas of endeavor, however, the United States puts everyone else in the shade. The bucks are really big for U.S. chief executives of big companies who boast an average salary of more than US$2.2 million a year. The U.S. remains dominant at other levels, too, including middle management and among manufacturing employees, though the gap is much less (see tables).

Mexican salaries also hold their own fairly well at the middle-management level, though they slip below those of Germany. And the wages of the average Mexican factory employee (US$15,312 a year) are high by Latin American standards but pale by comparison with those of the United States, Japan and Germany. Even companies in South Korea--still rated as an emerging economy--pay US$11,000 a year more than their Mexican equivalents.

Don't blame the companies for that, though, said Ignacio Cano who heads the Mexico City office of Towers Perrin. "Poor income distribution is a function of the whole social and economic environment of a country," Cano said, "and that's certainly true of Mexico." Education is also in need of a shake up, he added.

While high-tech learning begins at the primary school level in South Korea, children in Mexico's underfunded public school system struggle with basic mathematics and a curriculum that puts the emphasis on learning by rote, often stifling initiative in the process.

"Companies find that they have to invest a lot of time and money in training their Mexican workforces," said Cano. As a result, he said, labor costs can be relatively high while wages remain low.

EDUCATION WOES 

The public education system also explains, at least in part, the high salaries paid at the top end of the Mexican scale. With their heavy emphasis on the arts, Mexico's universities churn out thousands of graduates whose best hope of a starting salary is some US$600 a month. The shortage of suitable material coming out of the public universities is made more acute by the lure of the United States right next door.

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Bright graduates from Mexico's top private institutions routinely further their studies north of the border and many are snapped up there by U.S. corporations. As the old blues number goes, a good man is hard to find. Several multinational companies with operations in Mexico get round the shortage of executive talent by resorting to "third country" hirings, said Cano. "We find that U.S. companies looking for a chief financial officer, for example, increasingly recruit people from countries like Argentina and Brazil."

But while executive compensation in Mexico remains high by international standards, it has grown little in real terms since 1994 when Scrooge cast a grim shadow over the nation's Christmas dinners with a peso collapse that made almost everyone poorer as the New Year began.

Thanks to U.S. President Bill Clinton's decision to launch the biggest rescue operation in world financial history, and the determination of Mexican officials to keep a tight hand on the nation's purse strings, the crisis was over earlier than even optimists had imagined.

"But for several years, executives received double-digit salary increases. They needed the big raises to outstrip inflation and recover the ground that they lost in real terms," said Jeffrey Wright, managing editor of Mexico Watch, a business newsletter published by Orbis Publications in Washington.

GAINING GROUND, BARELY

The ground has been recovered but just barely, according to the most recent national salary survey of 250 companies of various sizes compiled by Mexico Watch together with the Aon-Intergamma human resources consultancy. The survey, published in October 2003, showed that executive pay is likely to have increased by a mere 8% in real terms over the decade since 1994. And don't look for fat pay hikes this year, either; salaries are likely to outpace inflation by only a hair's breadth. "Our study predicts an average increase of only half a percentage point in real terms for 2004," said Wright.

The Aon Intergamma-Mexico Watch survey, like the Towers Perrin global sounding, is based on total compensation packages, a concept that Wright says can be extremely complex in Mexico. Companies here steer executives through the potential pitfalls of the fiscal system with a host of tax-free benefits such as healthcare, meal and supermarket vouchers, life insurance, private pension plans and, above all, cars.

"I was really surprised by the number of people who had cars in most companies," said Wright. "Even relatively junior people had one. Not only that, but more and more companies are armoring the cars of their top executives, and that's a very big expense."

There are sound social and historical reasons for the omnipresence of cars in the executive ranks, says Cano. "Cars have become almost a necessity of life for the middle classes. Mexican companies have used them for years as a lure for executive recruitment. Now it's at the stage where, when you want to get the right person, the car is often the clincher."

While high-paid European executives seem happy to arrive to work on the subway, "even our middle classes have largely abandoned the Metro," said Cano.

HOW THEY RANK

The average total annual compensation package in selected countries.

Chief Executive Officers
United States  $2,249,080
Mexico           $960,759
Germany          $954,726
Spain            $620,080
Brazil           $545,024
Japan            $456,937
South Korea      $393,533
Argentina        $316,735

Middle/Upper Management
United States    $513,618
Germany          $391,462
Mexico           $355,890
Spain            $244,381
Brazil           $214,487
Japan            $233,039
Argentina        $155,477
South Korea      $142,358

Workers
United States     $51,121
Japan             $48,178
Germany           $44,757
Spain             $28,506
South Korea       $26,519
Mexico            $15,312
Brazil             $8,861
Argentina          $6,837

*All figures in U.S. dollars.
Source: Towers Perrin

RELATED ARTICLE: AmCham Salary Survey 2004

For over 30 years, the AMERICAN CHAMBER/MEXICO has conducted a survey of salaries and benefits offered to executive and management positions in Mexico. The published results give companies an overview of 108 positions and their present compensation and trends for the future. The 2004 survey includes 560 companies in 15 cities throughout Mexico.

The bilingual survey is an invaluable tool for companies that are establishing or reviewing salary policies or for companies expanding their workforce or opening operations in this market.

Although Mexico may compensate top executives well compared to other countries, it is clear from the first table below that there are significant disparities which are dependent upon company size, location, sector and origin of capital. This survey also includes the actual cost to the company in tax responsibilities and benefits.

SURVEY OF SALARIES AND BENEFITS 2004 (IN PESOS)

CHIEF EXECUTIVE OFFICER

          Monthly Base Salary  Guaranteed Benefits  Non-Guaranteed
                                                    Benefits

Average       67,883               7,049                5,957
Median        50,015               5,642                6,222
Minimum        5,300                 313                    0
Maximum      328,000              36,171              111,162

          Gross Compensation  Net Compensation  Cost to the Company

Average       80,888              57,154              96,740
Median        62,359              45,228              85,476
Minimum        5,786               4,948               8,527
Maximum      455,171             284,912             491,502

SALES AND MARKETING DIRECTOR

          Monthly Base Salary  Guaranteed Benefits  Non-Guaranteed
                                                    Benefits

Average       57,510                7,202                5,125
Median        47,592                4,438                3,146
Minimum        3,300                  187                    0
Maximum      183,380               29,499               44,862

          Gross Compensation  Net Compensation  Cost to the Company

Average        69,838               49,937             83,409
Median         61,803               44,765             74,950
Minimum         4,089                3,599              7,453
Maximum       217,626              162,853            243,274

EXECUTIVE SECRETARY TO THE EXECUTIVE OFFICE (SPANISH ONLY)

          Monthly Base Salary  Guaranteed Benefits  Non-Guaranteed
                                                    Benefits

Average         6,264                982                315
Median          5,500                761                185
Minimum         1,200                 78                  0
Maximum        31,899              4,892              2,659

          Gross Compensation  Net Compensation  Cost to the Company

Average        7,561                5,843             8,497
Median         6,458                4,950             7,405
Minimum        1,678                1,302             2,049
Maximum       39,448               29,226            42,737

MAINTENANCE SUPERVISOR

          Monthly Base Salary  Guaranteed Benefits  Non-Guaranteed
                                                    Benefits

Average         15,083              2,539                876
Median          12,235              2,014                377
Minimum          4,200                336                  0
Maximum         67,959              0,266             10,149

          Gross Compensation  Net Compensation  Cost to the Company

Average       18,498               14,394             21,221
Median        14,581               11,691             16,683
Minimum        5,300                5,264              6,586
Maximum       78,734               55,519             84,835

Source: AMERICAN CHAMBER/MEXICO

Ronald Buchanan is a freelance journalist and the correspondent in Mexico for Platts, McGraw-Hill's energy news service.