ACSI’s annual CEO pay study has been running for 25 years, just about as long as ACSI itself, and it’s a priceless, scrupulously researched record of long-running trends in executive pay. Every year it also seems to expose developing trends.
For example, last year’s study showed that termination payments – the money given to CEOs as they leave their job, instead of the money given to them to actually do their job – have steadily decreased following changes to the Corporations Act in the first decade of this century.
In FY08, $83 million of shareholder money was spent on 13 departing CEOs. In FY25, six CEOs left their jobs, and shared $8.38 million in termination benefits – the lowest amount in 15 years. This illustrates the consistent focus of Australian investors and boards, who have used the changes to termination payment laws to drive down the cost CEO departures, resulting insignificant savings for shareholders, and, in the case of superannuation funds, their members.
This year, the research found that US-based CEO salaries have soared past that of local CEOs, with five out of the top 10 highest earners this year leading US-domiciled companies.
It’s the first time in the history of the study that‘ outsiders’ have taken half of the top ten spots, although US-based CEOs have always made an appearance. What’s very clear this year, though, is how different the pay systems are in Australia and the US. Australian investors demand performance hurdles, whereas hurdles are lower in American boardrooms. Australian shareholders are a bit more willing to hold boards accountable.
Australian investors and boards have had more success keeping domestic remuneration to a more reasonable level, and ASX100 CEO fixed and cash pay levels continue to plateau. Despite a 4% rise this year to a median $1.83m, CEOs are still receiving less than their peer group in the record year of 2012, who took home a median of $1.95m.
When it comes to annual bonuses, however, there is still work to do. This year we again found that an ASX100 CEO is more likely to lose their job than their bonuses. In fact, aside from Covid’s FY20, every year for the past 11 has seen ASX100 CEOs receive a median bonus of between 60% and 77% of maximum bonus levels.
We’ll have to wait until next year to see if companies start to treat bonuses as genuinely at risk pay for performance rather than the ‘everyone gets a prize’ attitude which often seems to pay CEOs bonuses for just doing their jobs.
