Australia's biggest listed companies are under scrutiny for failing to factor in asset write-downs and other business costs when deciding on the size of executive bonuses.
The Australian Council of Superannuation Investors, whose members manage $350 billion in assets, said its revised governance guidelines for the 2013 reporting season took into account new expectations regarding board practices and executive pay.
It comes as companies release their annual reports for the 2013 financial year, detailing the incentives paid on corporate salaries. Council chief executive Ann Byrne said the trend of calculating bonuses on "adjusted" figures, rather than those required under disclosure rules, was worrying.
"The use of normalised and adjusted earnings in bonus plans will be in the spotlight this reporting season," Ms Byrne said. "Of particular concern are companies that exclude costs and impairments from bonus calculations.
"An impairment charge should not be excluded from the bonus calculations for the CEO and executive team which acquired the asset that has been impaired."
Ms Byrne would not name companies, but said of particular focus were bonuses paid for acquisitions rather than shareholder value ("empire building"), and fixed-pay increases for executives after a pay freeze ("catch-up" bonuses).
Several big pay rises have been revealed already during reporting this month. A 34 per cent rise for Aurizon chief executive Lance Hockridge took his total package last financial year to $6.1 million.
The chief executive of troubled steelmaker BlueScope, Paul O'Malley, also had his total salary package increased to $5.1 million in the year to June 30, up from $2.8 million a year earlier, after the steelmaker's board agreed to a 3 per cent rise in his base pay after a three-year freeze.
Ms Byrne said the re-election of a director to a board was also a focus of the new guidelines.
"ACSI will be particularly scrutinising boards where there have been ongoing strategic issues. The right to elect directors remains one of the important entitlements of Australian shareholders."
The Australian Shareholders' Association has also changed its preferred measurements for bonus pay. In a paper this month it said incentives should be calculated on relative total shareholder return, rather than earnings per share, as the latter had been manipulated by accounting treatments.