CEO pay deals surge to ‘highest level in 17 years’


Chief executive pay hit record highs over the past year as wages growth for workers continues to flatline and trust in big business ebbs amid fallout from the banking royal commission.

Key points:

  • ASCI chief executive Louise Davidson says results show company boards out of touch with community standards
  • Close to one in three ASX 100 chief executives awarded at least 80 per cent of maximum bonus
  • Investors likely to use power to send protest vote at upcoming AGMs

The latest CEO pay report from the Australian Council of Superannuation Investors (ACSI) shows pay for company bosses is at its highest level in 17 years thanks to, "persistent and increasing bonus payments".

The startling results come against the backdrop of the banking royal commission which has revealed unlawful, unethical and possible criminal activity in some parts of the banking and insurance sectors.

ASCI chief executive Louise Davidson told AM the results showed chief executives and company boards were out of touch with community standards, especially given the Federal Government's campaign for corporate tax cuts.

"At a time when public trust in business is at a low ebb and wages growth is weak, board decisions to pay large bonuses just for hitting budget targets rather than exceptional performance are especially tone deaf," Ms Davidson said.

"This may be a sign that boards have lost sight of the link between a company's social licence and the expectations of communities and investors."

The survey says median-realised pay for ASX 100 chief executives rose 12.4 per cent to $4.36 million and rocketed by 22.1 per cent to $1.76 million for ASX101-200 company bosses.

Bonus payments rose more than 18 per cent, with close to one in three ASX 100 chief executives awarded at least 80 per cent of their maximum bonus.

The top three ASX 200 earners in the 2017 financial year include Domino's Pizza Enterprises chief executive Don Meij at $36.8 million; Peter & Steven Lowy of Westfield at $25.9 million and Macquarie Group chief executive Nicholas Moore at $25.2 million.

The surge of chief executive pay in the face of public-trust issues raises the likelihood superannuation investors will use their power to send a protest vote at coming annual general meetings under Australia's "two strikes" law.

Under an amendment to the Corporations Act, a protest vote of 25 per cent or more at two consecutive AGMs against the adoption of a remuneration report could spark a boardroom spill.

"It's a sad state of affairs when bonuses have become such a sure thing," Ms Davidson said.

"If this issue is not addressed voluntarily, we may need legislative intervention to give shareholders a greater say as we have seen in other markets like the United Kingdom.

"If they [bonuses] are not transparent and reflective of performance, we will be recommending that our members vote against those remuneration reports."

In a sign of recent investor unrest, AMP's remuneration report was rejected by 61.4 per cent of shareholders at its annual general meeting in May — the biggest rejection of executive pay in Australian corporate history.

The report notes there were too few female chief executives to analyse a program on gender pay diversity

"There were more CEOs called Andrew in the ASX100 sample than women," the report said.

Average wages growth has flatlined in recent years with the Wage Price Index edging marginally higher to 2.1 per cent in the most recent reading, barely keeping up with inflation.

Follow Peter Ryan on Twitter @peter_f_ryan

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ABC .net

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