CEO fixed pay falls but bonuses rise
The pay packets of Australia’s leading CEOs are shrinking but bonuses are making up the shortfall, according to a new study.
The study from the Australian Council of Superannuation Investors found that the average fixed pay for chief executives in Australia’s 100 largest listed companies has fallen to its lowest in almost a decade, down 3.3 per cent to $1.86 million,
The fall was even larger across the ASX200, down 4.6 per cent.
ACSI’s CEO Louise Davidson said it’s no accident these falls came in the wake of the “two strikes” legislation designed to hold directors accountable for executive salaries and bonuses.
The two strikes rule is simple: under changes to the Corporations Act, when a company’s remuneration report receives a ‘no’ vote of 25 per cent or more the second time around, the entire board can potentially face re-election.
“Independent company directors should be acutely aware that the community believes CEO pay is out of step, representing as it does many multiples of ordinary people’s wages, and that boards risk an investor backlash if they do not keep a tight leash on management rewards,’’ Ms Davidson said.
However, the study also shows that some of these falls in salaries are being offsets by rises in bonuses.
The report found that 93 per cent of ASX 100 CEOs received a bonus last year, the highest figure since 2008 and median payout for those bosses that did receive a bonus was 76 per cent of the amount on offer.
Ideally, bonuses should be linked to a company’s performance, or outperformance, so appropriate hurdles need to be in place.
“Such a high proportion of CEOs receiving 76 per cent of their bonuses really raises questions about the appropriateness of bonus hurdles,” Ms Davidson said.
“This begs the question – are bonuses really just fixed pay dressed up as at-risk pay?”
by Leon Gettler, 1st September2016
