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Pandemic to test boards on exec pay: ASCI

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Remuneration packages for Australia’s top chiefs already were edging down ahead of COVID-19, according to new research, but an investor group has warned boards will need to read the room when deciding executive pay in the 2020 reporting season.

The Australian Council for Superannuation Investors (ASCI) has released its 19th annual CEO Pay in ASX200 Companies report, analysing company data published in 2019. 

Realised and reported pay for chief executives fell across the ASX 100 in financial year 2019, with the average declining by 7.4 per cent.

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The median realised ASX 100 CEO pay for the year was $4.1 million, while the average was $5.2 million.

Fixed remuneration had also fallen, with the median ASX 100 CEO fixed pay being flat year-on-year and sitting lower than as previous $1.95 million in FY12, to $1.76 million in FY19.

The median bonus had also dropped – from being awarded as a proportion of maximum of around 70 per cent in FY18 and the three years prior to 60 per cent in FY19.

The number of eligible ASX 200 CEOs who did not get a bonus more than tripled in FY19, from seven to 25. In the top 100, 12 CEOs received no bonus, compared to only one the year before.

ASCI CEO Louise Davidson it was “encouraging” to see that after years of engagement and investor scrutiny, boards had applied a greater level of restraint on executive remuneration. 

“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,” Ms Davidson said.

“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 [ASX 200] 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 had followed the downward trends however – substantial increases in share prices saw the addition of new companies in the top 10 paid CEO list, as equity incentives increased in value. Seven of the 20 highest paid chiefs came from outside the ASX 100 and it was the first time that a CEO from outside the 100 topped the list.

The study did not include CEOs appointed midway through the year – leaving out Macquarie chief Shemara Wikramanayake as a result – and it also did not include companies domiciled outside of Australia.

Andrew Barkla, CEO of IDP Education was the highest-paid chief on a realised pay basis, taking home $37.7 million – considerably more than the previous year’s top remuneration of $23.8 million. 

CSL head Paul Perreault and Clinuvel Pharmaceuticals CEO Philippe Wolgen followed with $30.5 million and $20.6 million respectively. 

Qantas CEO Alan Joyce was seventh in the list, with his packet containing $12.2 million, with Rio Tinto chief JS Jacques coming in tenth with $10.3 million.

“These results are a reminder that equity incentives have the potential to significantly boost the quantum of remuneration,” Ms Davidson said.

“In volatile market conditions, boards need to carefully consider the potential value of equity and appropriate hurdles before grants are made.” 

Ten ASX 200 CEOs also received maximum bonus outcomes in FY19 – Magellan chief Hamish Douglass was among them, being awarded $5 million.

 

Pandemic to test boards on exec pay: ASCI
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Sarah Simpkins

Sarah Simpkins

Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth. 

Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio. 

You can contact her on [email protected].

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