The chief executives of Australia’s largest publicly listed companies have taken a financial hit with their average take-home pay falling to its lowest in nine years, according to a report by the Australian Council of Superannuation Investors (ACSI).
Research commissioned by the investor group shows that the CEO pay at Australia’s largest 100 companies listed on the ASX dropped from post-pandemic record highs in 2021 with realised pay, consisting of bonuses and base salaries, in retreat amid tougher economic conditions and tougher attitudes in the boardroom.
The size of the change is best captured in the statistic that compares average CEO weekly pay with that of their workforce.
“It went from effectively 98 times adult earnings – in that post-pandemic bounceback – to 55 times, which is still a decent amount,” said Ed John, ACSI’s head of stewardship.
Company boards were effectively playing catch-up in 2021 after the pandemic wiped out bonuses in 2020, according to John.
“We’re probably seeing a bit more restraint from boards, in terms of bonus allocations, but I think one kind of key issue is actually what happens in 2023,” he says.
A drop in bonuses appears to have been a major component of the decline.
A survey of executive remuneration last month by the Governance Institute of Australia, found that average fixed pay for ASX 200 chief executives – that is, pay before bonuses – rose 15 per cent to $1.14 million in the 2022-23 financial year compared with the prior year.
ACSI noted that CEO fixed pay had declined over the last decade.
The median fixed pay for 2022 was $1.74 million, the lowest in a decade and down from $1.95 million in 2012 as the boards of companies such as Qantas and Telstra used the appointment of new CEOs as an opportunity to whittle down salaries.
Griffith Business School Professor Nick Barter says the pay drop is a welcome trend.
“There may be some humility coming back where people are starting to take a more systemic perspective of businesses and realise this notion of hero CEOs doing everything themselves is nonsense. But also there may be some broader trends like we are experiencing a slowdown, we’re all feeling a bit poor, and consequently, it’s a bit unsavory and unseemly to pay CEOs excessive amounts,” he says.
ACSI’s research over the past nine years has focused on executive “realised pay” as opposed to the statutory pay, which is reported in company financial accounts each year.
The difference between the two is that realised pay is viewed as a more accurate measure of what the CEOs actually receive in terms of cash and shares. Statutory pay relies on estimates of a company’s future share price and other factors.
Whether this pay slump is merely a post-COVID hangover, or a real trend, remains to be seen, but faltering economic conditions should keep the pressure on executive pay for 2023 at least.
“Investors will be watching closely as reporting season gets under way, and we see the numbers for 2023. It has been a choppy year for investors in many companies – boards will need to consider performance carefully when deciding on remuneration this year,” John said.
“If performance is down in 2023, we expect to see bonuses follow.”
The research noted that overseas based CEOs were paid significantly more than their Australia-based counterparts coming in at an average of $11.1 million compared to the $4.2 million for the 159 locally-based CEOs.
Resmed’s CEO, Mick Farrell, led the field for realised pay last year with $47 million, followed by Goodman Group’s Greg Goodman with $44.3 million.
Macquarie Group’s Shemara Wikramanayake has become the first woman to top the reported earnings table for in successive years, with $23.7 million in 2022 and $16 million in 2021.
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Source: Thanks smh.com