The 13th Annual ACSI Survey of Chief Executive Remuneration – which surveyed the pay of chief executives of all companies in the S&P/ASX200 – has found the median termination payments to chief executives decreased from $3.5 million in 2008 to $1.3 million in the 2013 financial year.
ACSI chief executive Gordon Hagart said the study findings show the benefit of investor scrutiny around executive members' pay.
“When investors behave like owners, and make it clear to boards their expectations around executive pay, Australian boards generally respond,” Mr Hagart said.
“It seems boards and investors have, together, used the changes to termination payments legislation to drive down the aggregate costs to shareholders of executive departures.
“An important parallel effect has been better alignment between management and owner, and a reduction in the perverse outcomes that can result from overly-generous termination arrangements – the ‘pay for failure’ syndrome,” Mr Hagart said.
Mr Hagart also said increased investor engagement, combined with the work of more active board members, has resulted in “better remuneration packages that improve alignment”.
“We have seen fewer votes against remuneration reports over the past year as remuneration packages have improved in the market,” Mr Hagart said.
“Specific improvements include the major reduction in termination payments, more demanding bonus hurdles, longer performance measurement periods and an end to the culture where bonuses were seen as entitlement rather than reward for outperformance,” he said.
