Board restraint on CEO pay to be tested during pandemic

Fixed pay and bonuses for Australia’s leading CEOs continued to edge down ahead of the COVID-19 pandemic, according to new research from the Australian Council of Superannuation Investors (ACSI).

Now in its 19th year, ACSI’s CEO Pay in ASX200 Companies research analyses data published by companies for the 2019 financial year. The research comes ahead of the 2020 financial reporting period which will reveal the impacts of the COVID-19 pandemic in company performance and remuneration outcomes.

ACSI’s research allows investors to track and assess long-term trends in executive remuneration in Australia’s largest listed companies.

Key findings from ACSI’s FY19 research:

  • Realised and reported pay for CEOs fell across the ASX100 during FY19. Median and average realised pay across the ASX100 sample fell in FY19, with the median declining 8.2% and the average 7.4%.
  • Fixed remuneration for CEO’s has also fallen over time.
    Median ASX100 CEO fixed pay was flat year-on-year and has fallen from $1.95mn in FY12 to $1.76mn in the latest year.
  • Bonuses were persistent but average awards dropped. The median bonus awarded as a proportion of maximum was 60% in the ASX100. This is a fall from the ~70% recorded in FY18 and the three years prior.
  • The number of eligible ASX200 CEOs who did not get a bonus more than trebled, from 7 to 25. In the ASX100, 12 CEOs received zero bonus (FY18: one).
  • Not all ASX200 companies followed the downward trend. There were examples of CEO’s receiving very high realised remuneration. Substantial increases in share prices saw the addition of several new companies in ACSI’s list of the 10 highest-paid CEOs.

“Our research provides a snapshot of what executive remuneration looked like in the year prior to the COVID-19 pandemic. It is encouraging to see that, after many years of engagement and scrutiny from investors, boards have applied a greater level of restraint assessing executive remuneration.” ACSI CEO Louise Davidson said.

“More boards are using sensible discretion to rein in outcomes for senior executives – demonstrated by the fact that 25 CEOs in the last year had their bonuses zeroed out where performance was not adequate, compared with only seven a year earlier.”

“That growing maturity and sophistication will be put to the test this year as boards wrestle with the deep and persistent impacts of COVID-19 across the Australian community, and globally. Boards of ASX200 companies will need to seriously consider how remuneration outcomes will be perceived externally, given the widespread impact of the pandemic on investors, staff, customers, governments and other key stakeholders.”

Not all companies followed the downward market trends. Substantial increases in share prices (that increased the value of equity incentives) saw the addition of several new companies in ACSI’s list of the 10 highest-paid CEOs, on a realised-pay basis.

“These results are a reminder that equity incentives have the potential to significantly boost the quantum of remuneration. In volatile market conditions, Boards need to carefully consider the potential value of equity, and appropriate hurdles, before grants are made.” ACSI CEO Louise Davidson said.

10 highest-paid ASX200 CEOs on a realised-pay basis in FY19:

Rank CEO Company Realised Pay
1 Andrew Barkla IDP Education $37,761,322
2 Paul Perreault CSL $30,526,634
3 Philippe Wolgen Clinuvel Pharmaceuticals $20,624,450
4 Michael Clarke Treasury Wine Estates $19,853,177
5 John Guscic Webjet $16,498,937*
6 Greg Goodman Goodman Group $14,967,391
7 Robert Kelly Steadfast Group $14,419,677
8 Alan Joyce Qantas Airways $12,217,400
9 Colin Goldschmidt Sonic Healthcare $11,912,450
10 JS Jacques Rio Tinto $10,323,975

*  WEB CEO realised pay includes share options which are currently valued to be significantly lower . The realised pay figure for the WEB CEO includes a $15.038mn gain from options with an exercise price of $5.54 exercised when the share price was $17.57. The CEO did not sell these shares and the current WEB share price is below the option exercise price.

Realised pay, as in prior years, is calculated on a ‘cash pay’ basis; that is, reported pay excluding share-based payments expense but including the value of any equity that vested during the reporting year, using disclosures from annual reports and ‘Change of director interest’ notices.

For additional information please contact:

Nathan Robertson

P: 0423874662

E: nrobertson@acsi.org.au

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