CHROs vs. EU Pay Transparency: Managing the Executive Compensation Challenge

Executive pay packages have long operated behind closed doors. That’s changing. 

The EU Pay Transparency Directive, already in force since June 2023, must be implemented into national legislation by all member states by June 7, 2026, when companies will face enforceable requirements that expose compensation practices from entry-level to executive positions.  

Chief Human Resources Officers (CHROs) now confront the challenge of completely rethinking how organizations explain and justify what people earn across every level. 

The End of Opaque Executive Pay

Recent data shows median CEO compensation in Europe’s top 100 companies exceeds €4 million, reaching €4.15 million when including bonuses. These figures will face new scrutiny under transparency rules requiring companies with gender pay gaps above 5% to conduct joint pay assessments with employee representatives. 

The directive goes beyond simple disclosure. Employers must now prove they haven’t violated equal pay rules, a reversal of traditional burden of proof that puts organizations on the defensive. When employees can request comparative pay data for roles of equal value, executive compensation differentials become harder to justify without clear, objective criteria. 

This transparency arrives as CEO-to-worker pay ratios vary dramatically across European markets, with Finnish companies averaging 37.1 times and Danish companies reaching 50.3 times the mean employee salary. The directive will make these disparities visible not just to shareholders but to entire workforces, creating pressure points CHROs must manage carefully. 

Building Defensible Compensation Frameworks

CHROs face the challenge of creating pay structures that can withstand public scrutiny across all organizational levels. The directive mandates objective and gender-neutral criteria for setting pay, pay levels, and pay progression, forcing organizations to articulate why roles command certain compensation levels. 

This becomes particularly complex for executive positions where “equal value” determinations involve nuanced assessments of responsibility, impact, and market factors. Variable pay, including bonuses, overtime, and all benefits, falls under the directive’s broad compensation definition, requiring CHROs to explain not just base salaries but entire compensation packages. 

However, over a third of organizations haven’t conducted any pay equity analysis in the past year, suggesting many companies remain unprepared. CHROs who haven’t started comprehensive pay audits face a compressed timeline. Companies with unresolved gaps by January 1, 2026, will see them publicized in their first reports. 

Managing Pay Equity Through the Organization

The directive’s requirements flow through every organizational tier, creating interconnected challenges CHROs must address holistically. First reports are due in June 2027 for companies with 150+ employees, covering the 2026 calendar year, with companies of 100-149 employees reporting from 2031. This exposes internal pay structures to analysis by employees, unions, and monitoring bodies. 

Gartner emphasizes the need for clear “pay philosophy” that CHROs must establish and communicate throughout their organizations. This philosophy must explain compensation decisions at every level while maintaining flexibility to compete for talent in varied markets. 

The requirement to disclose salary ranges in job postings and prohibition against asking salary history questions changes recruitment dynamics entirely too. CHROs must prepare hiring managers for negotiations where candidates know the pay range upfront, potentially accelerating wage growth as transparency reveals market disparities. 

For middle management and professional roles, transparency creates particular tensions. When employees can see pay ranges across the organization, internal equity concerns multiply. CHROs must balance market competitiveness with fairness perceptions, all while documenting decisions with objective criteria that can survive legal scrutiny. 

From Compliance to Culture Change

With only 21% of organizations feeling well-prepared according to Littler’s European Employer Survey, CHROs face immediate pressure to act. The timeline leaves little room for delay.  

But implementation requires more than technical compliance. The directive’s inclusion of intersectional discrimination provisions means CHROs must consider how gender intersects with other protected characteristics in compensation decisions. This complexity demands sophisticated analytics and a willingness to address systemic inequities that transparency will reveal. 

CHROs must also prepare for cultural resistance. Moving from pay secrecy to openness requires organizational mindset changes, particularly at senior levels where compensation has traditionally been confidential. Building support among executives who may resist transparency becomes essential for successful implementation. 

Making Transparency Work for Your Organization

Smart CHROs recognize that transparency, while initially disruptive, creates opportunities to build trust and improve talent attraction. Organizations that handle this transition well position themselves favorably with employees who increasingly expect clarity around compensation. 

Success requires moving beyond minimum compliance, however, to create compensation systems that are both fair and market-competitive. This means developing clear career progression frameworks, establishing performance metrics that justify pay differences, and creating compensation philosophies that align with organizational values while meeting business needs. 

The directive also connects to broader corporate reporting requirements. The Corporate Sustainability Reporting Directive (CSRD) requires disclosure of gender pay gaps and CEO-to-average-employee pay ratios, making compensation transparency part of larger ESG commitments that investors and stakeholders monitor closely. 

The executives who successfully manage this transition will be those who can balance transparency with business needs, fairness with market realities, and compliance with cultural change. Stanton Chase works with organizations worldwide to find and develop such leaders, bringing together our executive search and advisory expertise to help companies build leadership teams ready for Europe’s pay transparency requirements. 

About the Authors

Tom Goorman is Managing Partner of Stanton Chase Brussels and Member of the Governance Committee. He has over 20 years of experience in executive search, providing strategic partnerships to clients across various industries, including technology, industrial, telecommunications, and professional services. He possesses a talent for discovering and nurturing C-suite executives and board members who drive exponential growth and success for their organizations.   

Falco Nicklas is Managing Partner of Stanton Chase Düsseldorf, specializing in executive search across the industrial and automotive sectors. He has extensive experience placing leaders at the general management, business unit director, and commercial levels for both mid-sized companies and global corporations. He is recognized for his strategic insight into industry trends and his ability to build lasting relationships with industrial professionals, resulting in an extensive network of proven leaders. His clients value his aptitude for identifying executives who match their unique organizational needs and culture.