The Australian Council of Superannuation Investors (ACSI) has released its 17th annual survey CEO remuneration in ASX200 companies: CEO Pay in ASX 200 companies: ACSI Annual Survey of S&P/ASX200 Chief Executive Remuneration July 2018. 

The Australian Council of Superannuation Investors (ACSI) has released its 17th annual survey CEO remuneration in ASX200 companies: CEO Pay in ASX 200 companies: ACSI Annual Survey of S&P/ASX200 Chief Executive Remuneration July 2018. According to the report, average realised CEO pay outcomes are at the highest levels in four years and bonuses paid to ASX100 CEOs reached their highest levels since the survey commenced 17 years ago. ACSI attributes the upswing in part to strong capital market performance (ie CEOs benefiting from the value of equity awards) but highlights 'persistent and increasing bonus payments' as a key factor. 'Across the sample, bonus persistence was strikingly apparent – most ASX100 CEOs received a bonus at a significant proportion of their maximum entitlement – and its quantum increased' ACSI writes.

Key findings

  • 'CEO pay has hit record highs' with reported pay for ASX100 CEOs at the highest levels it has been in the 17 years of the study. Median realised pay for an ASX100 CEOs rose 12.4% to $4.36 million, and increased 22.1% to $1.76 million for ASX101-200 CEOs.
  • Base pay for ASX100 CEOs, showed little growth ACSI found. ACSI attributes this to the fact that incumbent CEOs received modest pay increases and new CEOs are being appointed on lower fixed pay than their predecessors.
  • Bonus payments increased: According to ACSI bonuses increased more than 18%. The median bonus awarded to an ASX100 CEO was at 70.5% of their maximum entitlement.
  • Bonuses 'resemble variable fixed pay' ACSI writes, commenting that CEOs appear more likely to lose their jobs than their bonuses. According to the findings, in FY17, 74 of the 80 CEOs eligible for a bonus received one, and the median outcome was 70.5% of maximum (FY16: 68.6%). There were 10 Top 100 CEOs who departed their roles in FY17. Commenting on this, ACI CEO Louise Davidson said that the fact that bonuses have 'become such a sure thing' is an issue that if not addressed may 'need legislative intervention to give shareholders a greater say – such as we have seen in other markets, like the United Kingdom'. Ms Davidson added that bonus outcomes would be a focus for ACSI in the upcoming reporting season and that ACSI would recommend members vote against remuneration reports where ACSI considers they are 'not transparent and reflective of performance'.
  • Topping the list of the highest paid CEOs was Domino's Pizza Enterprises CEO Don Meij ($36,837,702) followed by Peter and Steven Lowy of Westfield Corp ($25,906,960) and Nicholas Moore of Macquarie Group ($25,191,040).
  • Too few women to be able to analyse gender pay equity: ACSI writes that there were too few female CEOs in the ASX 200 to enable an analysis of gender pay equality to be conducted with 4 female CEOs in the ASX 100 and 5 in the ASX 101-200. ACSI comments that 'There were more CEOs called Andrew in the ASX100 sample than women'.

Out of step with 'investor expectations'? Commenting generally on the survey results, ACSI CEO Louise Davidson said: 'The increase in pay levels for CEOs occurs at a time when public trust in business is at a low ebb, and wages growth in the broader economy can best be described as anaemic. Against this background, decisions to significantly increase bonuses appear not only tone-deaf but also make me wonder whether boards have lost sight of the link between community and investor expectations, and a company’s social licence to operate'.

The survey has received wide media coverage. The Australian comments that the report is significant because it demonstrates the disparity between CEO earnings and average annual earnings, noting that overall, CEOs are earning 52 times average (83,000) earnings. The article also points out that the for the first time in the survey's history there is no 'bank boss' in the top 10 ranking.

[Source: Australian Council of Superannuation Investors media release 17/07/2018; CEO Pay in ASX 200 companies: ACSI Annual Survey of S&P/ASX200 Chief Executive Remuneration July 2018; The Guardian 17/07/2018; [registration required] The Australian 17/07/2018; [registration required] The AFR 16/07/2018]

Time to consider binding votes on CEO pay? The AFR reports that speaking at the ACTU national conference Australian Labor Party President Wayne Swan commented that: 'Ten years on this year from the GFC, when exec pay was completely out of control and part of the reason for collapse of global economy, we are back to the point when executive pay was higher than it was then'. According to the AFR, Mr Swan suggested that to address the issue, shareholders should 'agitate for a binding vote to cap CEO pay'.

Separately, ACTU secretary Sally McManus is also quoted by The AFR as stating that remuneration levels will be a focus for superannuation trustees when making investment decisions.