Investor engagement keeping CEO pay in check

Pay outcomes for CEOs at Australia’s leading companies fell to their lowest levels in more than a decade in the 2020 financial year, according to the latest research from the Australian Council of Superannuation Investors (ACSI).

The research showed that almost one third of ASX100 CEO’s received no bonus in the past financial year.  This is in contrast to the period following the global financial crisis where all but 12 ASX100 CEO’s received a bonus in FY2009.

Now in its 20th year, ACSI’s CEO Pay in ASX200 Companies research analyses data published by companies for the 2020 financial year, the first to reflect the impacts of the COVID-19 pandemic on 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.

“The research shows that boards have responded positively to more than a decade of active investor engagement and are now better aligning short and long term pay with investor outcomes” said ACSI CEO Louise Davidson.

Key findings from ACSI’s FY20 research:

  • 31% of CEOs received zero bonus for performance reasons in FY20 – the highest number recorded in the 20 years of the study.
  • The median bonus (as a proportion of maximum) almost halved from 60% to 31%, or $1.14mn – the lowest in ACSI’s 10 years collecting data.

  • For the first time in ACSI’s study, realised pay for a CEO topped $40mn – CSL’s Paul Perreault realised $43.04mn (FY19: $30.53mn).
  • The research has also, for the first time, calculated realised pay for 12 ASX200 companies based outside Australia, showing the effect of living in different jurisdictions. The US-based CEOs of ResMed and Avita Medical realised respective pay of $45.59mn and $37.57mn. By contrast, five New Zealand-based CEOs collectively realised just $9.28mn.

The reweighting over the past decade of executive packages from cash to equity, and reductions in overall quantum, demonstrates the value of both this study and the engagement by ACSI and its members with companies over time.

“ACSI has been engaging with companies on executive remuneration to improve outcomes for its members. Boards have worked to ensure remuneration is aligned to the value delivered to investors over the long-term.”

“Newly appointed CEOs almost always now start on a salary base significantly lower than their predecessors and bonuses are becoming not just harder to achieve, but more often paid in equity rather than cash,” Ms Davidson said.

Not all companies followed the downward market trends with a number of outliers receiving high levels of realised pay.

“As the impact of the pandemic subsides, boards will need to keep assessing whether performance hurdles and the value of shares being awarded are appropriate to ensure any new incentives align with gains made by investors.”

10 highest-paid ASX200 CEOs on a realised-pay basis in FY20:

Rank CEO Company Realised Pay 1 yr TSR   5 yr TSR (P/A)
1 Paul Perreault CSL $43,044,606 35.0% 28.9%
2 Bill Beament Northern Star $31,783,929 16.4% 45.9%
3 Greg Goodman Goodman Group $26,868,195 0.9% 22.3%
4 Shemara Wikramanayake Macquarie Group $16,394,225 -30.5% 7.4%
5 Jake Klein Evolution Mining $15,849,082 33.8% 41.2%
6 Brad Banducci Woolworths Group $12,675,608 15.4% 10.5%
7 JS Jacques Rio Tinto $11,878,372 20.7% 28.1%
8 Michael Clarke Treasury Wine Estates $11,307,382 -27.6% 19.0%
9 Kevin Gallagher Santos $11,041,969 -22.1% 12.7%
10 Sandeep Biswas Newcrest Mining $10,985,657 -0.3% 20.3%

*Company listed on ASX in 2015

TSR calculated to the FY20 balance date for each company. 5 year TSR is calculated per annum. For the majority of companies on the list, FY20 year end was 30 June 2020 or 31December 2020. Macquarie Group’s year end was 31 March 2020, corresponding with a short-lived drop in market value that occurred with the onset of the COVID-19 pandemic.

REALISED PAY: As in prior years, this 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:

Annie Lawson
Manager, Media and Communications
P: 0409 869 986
E: alawson@acsi.org.au

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