The pay packets of ASX100 chief executives are shrinking and are now at pre-2008 levels, with the median fixed pay for 2015 financial year at $1.7m, according to a report published by the Australian Council of Superannuation Investors on Wednesday.
“To be clear, the shrinking of fixed pay is certainly not due to incumbent CEOs taking pay cuts, though they are receiving minimal pay rises,” the council’s CEO, Louise Davidson, wrote in the report’s foreword. “It’s down to boards taking the opportunity to pay the replacements of departing CEOs less.”
Between 2001 and 2008, median fixed pay for Australian CEOs rose 120%, she wrote, from $780,975 to $1.7m. But, after the global financial crisis, fixed pay had come down, she said.
The council says this has occurred in part because of the federal government’s “two strikes” law, which came into effect in 2011 and which dictates that if the remuneration report of a firm is rejected by 25% or more of shareholders for two consecutive years, the entire board of directors may face re-election.
“Year by year, we’ve since seen fixed pay come down,” Davidson said.
“Independent company directors should be acutely aware that the community believes CEO pay is out of step, representing as it does many multiples of ordinary people’s wages, and that boards risk an investor backlash if they do not keep a tight leash on management rewards.”
For the first time, the report also examined bonuses and found more CEOs are getting them. Of the 86 ASX100 CEOs surveyed in 2015, 93% received a bonus. The median was 76% of the maximum available bonus.
Receiving bonuses had become normal, raising questions about whether the criteria for being awarded bonuses was set too low, Davidson told Guardian Australia.
“The bonuses don’t completely offset the reduction in pay, so it’s not like bonuses are being shifted from one part of the pay packet to another,” she said.
“But you wouldn’t expect 93% of CEOs to be receiving a bonus, my expectation would be closer to 50%. That says to me there is something out-of-kilter here. You would only receive a high bonus in an exceptional year and they should only be used to reward exceptional performance.”
ASX100 companies needed to be more transparent about their bonus criteria and incentives, she said. While companies argue this would reveal their strategy to competitors, Davidson said this information could be provided to shareholders retrospectively.
The report also examined the ASX100 CEOs who earned the highest realised pay – that is, their pay including the value of shares received during the financial year. The highest-paid CEOs on a realised pay basis were the co-CEOs of Westfield Corp, Steven and Peter Lowy, who realised $24.7m against reported pay of $21.7m.
They were followed by Seek CEO Andrew Bassat, who realised $19.39m, and Scentre Group CEO, Peter Allen, with a realised pay of $17.9m. There were no women in the highest 10 paid CEOs list, with only five of the ASX100 CEOs women.
