Persistent and increasing bonus payments to Australia’s top chief executives are driving remuneration to record levels, according to the latest analysis of CEO pay by the Australian Council of Superannuation Investors (ACSI).
“At a time when public trust in business is at a low ebb and wages growth is weak, board decisions to pay large bonuses just for hitting budget targets rather than exceptional performance, are especially tone-deaf,” Louise Davidson , CEO at ASCI said.
“This may be a sign that boards have lost sight of the link between a company’s social licence and the expectations of communities and investors.”
Bonuses to ASX100 CEOs were the highest recorded in the history of our survey. While bonuses were smaller and harder to get for ASX101-200 CEOs, they still exhibited a remarkably high degree of persistence for a payment routinely described as ‘at risk’.
Davidson said, “It’s a sad state of affairs when bonuses have become such a sure thing. If this issue is not addressed voluntarily, we may need legislative intervention to give shareholders a greater say – such as we have seen in other markets, like the United Kingdom.
“In light of these results, we will be looking closely at bonus outcomes in the upcoming reporting season. If they’re not transparent and reflective of performance, we will be recommending that our members vote against those remuneration reports.”
Many CEOs reaped the rewards of being paid in equity, with strong equity market performance driving a sharp increase in realised pay (which includes the value of equity on vesting).
Base pay for ASX100 CEOs, the fixed component of their remuneration, showed little growth. This reflects incumbent CEOs receiving modest increases and new CEOs being appointed on lower fixed pay than their predecessors.
Yet again, there were too few female CEOs in the ASX200 (ASX100, 4; ASX101-200, 5) for us to analyse gender pay equality in our survey. There were more CEOs called Andrew in the ASX100 sample than women.
The 2018 report, ACSI’s 17th in this long-running study, found that:
• CEO pay has hit record highs. Reported pay for ASX100 CEOs is the highest it has been in the 17 years of the study.
• ASX100 CEOs are more likely to lose their job than their bonus. In FY17, all but six of the 80 CEOs eligible for a bonus received one, compared with 10 CEOs departing their roles.
• Bonus payments up more than 18 per cent. The median bonus awarded to an ASX100 CEO was at 70.5 per cent of their maximum entitlement.
• Close to one in three ASX100 CEOs were awarded at least 80 per cent of their maximum bonus in the latest period.
• Median realised pay for an ASX100 CEO rose 12.4 per cent to $4.36 million and was up 22.1 per cent to $1.76 million for ASX101-200 CEOs.