Claims that UK CEOs need higher pay to match counterparts in the US “often lack merit”, though bigger pay packets may be effective in a small number of cases, according to City grandee Paul Drechsler.

A former president of the CBI and ex-chair of financial services firm Bibby, Drechsler says the argument under way in the City for higher CEO pay is problematic against a backdrop of a rising cost of living. And he casts doubt on claims that higher pay is necessary for improved UK economic growth.

Direct comparison of UK with US CEO pay levels “does not provide an effective benchmark”, Drechsler writes in an exclusive article for Board Agenda.

He adds: “The arguments advocating for substantially higher CEO pay in the UK often lack merit. What truly drives economic growth in the UK is private sector investment, which influenced by factors such as political stability, infrastructure investment, adherence to the rule of law, a clear national vision and consistent tax and industrial strategies.”

A debate has flared over raising CEO pay, following a blog by London Stock Exchange chief executive Julia Hoggett. She wrote that proxy agencies and “some” asset managers were voting against pay deals that were already below “global benchmarks”. Low pay levels were a “downside” risk to “our economy and our competitiveness”, she said.

More dough, she wrote

“We are at a pivotal moment,” Hoggett wrote. “We should be encouraging and supporting UK companies to compete for talent on a global basis, so we remain an attractive place for companies to base themselves, stay and grow.

“The alternative is we continue standing idly by as our biggest exports become skills, talent, tax revenue and the companies that generate it.”

Last month, The Times reported that plans were under way to increase the pay package of Hoggett’s boss, David Schwimmer, from £4.6m to £11m.

The pay debate has prompted many interventions. Hoggett’s blog caused one think tank, the High Pay Centre, to call the argument “tone deaf” .

Last week, in another article for Board Agenda, pay expert Sandy Pepper, a professor at the London School of Economics, dubbed calls for higher pay “magical thinking” and said they confused “cause an effect.”

Read Paul Drechsler’s Comment article here.