Chief executives find bonuses a bit skimpy

The Australian Council of Superannuation Investors (ACSI) found that cash bonuses for leaders of Australia’s biggest companies fell to levels not seen since before the financial crisis. Average bonus payments were about $1.25 million last year, the lowest since 2004, and were down roughly 20% on the previous year.

ACSI reported the average cash pay for a top-100 CEO declined 8.9% from 2010 to $3.05 million. That drop mainly reflected smaller bonus payments, while fixed or base pay for those CEOs held steady in 2011.

Yes. Despite the reduction in bonus sizes, the ACSI analysis noted that about 90% of chief executives still received some form of bonus on top of their fixed pay.

ACSI chief executive Ann Byrne said boards and investors were having a more mature conversation about executive pay. Directors began listening to shareholder views on bonus sizes during 2011, and those adjustments continued into the first part of 2012.

Yes. ACSI’s analysis of the nation’s top 200 companies shows a pay gap between what companies disclose and what executives realise. Disclosed pay can understate the true amount because it may not include the upside from deferred shares or exercised options.

The ACSI report cites BHP Billiton’s Marius Kloppers as an example: his reported pay was $11.08 million, but his realised pay — which includes additional upside from other packages — was $17.3 million.

Minimum disclosures typically don’t capture the upside executives can receive from deferred bonus shares or by cashing in options. Options give the right to buy company shares, often at a discounted price, which can substantially increase realised pay beyond the headline disclosure.

Look beyond base salary and headline bonus figures: check for notes on deferred bonus shares, option grants and how realised pay is reported. Independent analyses like the ACSI remuneration report can also highlight gaps between disclosed pay and what executives actually take home.