CEO pay has surged to record levels in Australia

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  • CEO pay in ASX-listed companies are at record highs.
  • The key reason is generous bonuses which keep getting awarded for hitting targets rather than any exceptional performance.
  • The Australian Council of Superannuation Investors is watching closely and may be voting against executive pay at company AGMs.

Generous bonuses have driven the pay of Australia’s top chief executives to record levels, according to the latest analysis by the Australian Council of Superannuation Investors (ACSI).

The 2018 report found that reported pay for ASX100 CEO’s is the highest it has been in the 17 years of the study.

The ACSI says the large bonuses, being paid for hitting targets rather than any exceptional performance, show companies aren’t heading the expectations of communities and investors.

Median realised pay for an ASX100 CEO rose 12.4% to $4.36 million and was up 22.1% to $1.76 million for ASX101-200 CEOs.

Bonus payments were up more than 18% in the 2017 financial year with the median incentive awarded to an ASX100 CEO equivalent to 70.5% of their maximum entitlement.

All but six of the 80 CEOs eligible for a bonus got one.

“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,” says ACSI CEO Louise Davidson.

“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.”

Don Meij, the long-serving CEO of Domino’s Pizza Enterprises, is the highest paid chief executive of an ASX200 company, earning $36,837,702 in the 2017 financial year. His pay was almost eight times his statutory pay, and well above his 2016 realised pay of $21.03 million.

Bonuses to ASX100 CEOs were the highest recorded in the history of the survey.

Bonuses were smaller and harder to get for ASX101-200 CEOs but they still exhibited a remarkably high degree of persistence for a payment routinely described as at risk, says Davidson.

“It’s a sad state of affairs when bonuses have become such a sure thing,” she says.

“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 pay, showed little growth.

This reflects incumbent CEOs receiving modest increases and new CEOs being appointed on lower fixed pay than their predecessors.