BOSSES of Australia's largest companies enjoyed pay rises almost three times the rate of inflation and equivalent to more than twice the average wage in the past year.
A Saturday Age analysis of company reports filed in recent months by most of the country's 100 largest ASX-listed companies shows that the median increase in base pay for chief executives for their latest financial year was about 9 per cent up from $1.47 million to $1.61 million.
Add in the chief executives' short-term cash bonuses and the cash-in-pocket rises to $2.61 million, up 5 per cent. In dollar terms, that means they picked up cash gains of about $130,000 a year.
The Australian Bureau of Statistics' most recent figure for the annual average wage is about $53,000. It estimates that wages have risen by 4.7 per cent for males and 4.1 per cent for females over the past year.
Australia's consumer price index at June 30 rose by 3.6 per cent, with the impact of higher fruit and petrol prices. The Reserve Bank this week estimated that inflation was now running closer to its preferred range of 2 to 3 per cent, excluding any impact of carbon tax proposals.
Among the ASX 100, the top five best-paid chief executives last financial year were Westfield's Frank Lowy ($15.96 million), Rio Tinto's Tom Albanese ($12.75 million), ANZ's Mike Smith ($10.86 million), BHP's Marius Kloppers ($10.84 million) and Westpac's Gail Kelly ($9.59 million).
Executive and board remuneration will soon come under further scrutiny from shareholders, whose investments have been hit by collapsing markets, as this year's annual meeting season begins.
"Shareholders will say: 'We know it's tough, we understand it's tough, but should we be the only ones who hurt? You still get bonuses . . .whereas I only get my bonus when the sharemarket is performing well'," warned Ann Byrne, chief executive of the Australian Council of Superannuation Investors, the group that represents industry super funds.
Total remuneration of executives, which includes the estimated value of share packages that may take several years to earn, showed a median decrease of 1.3 per cent, from $3.57 million to $3.52 million in the latest financial year.
That decline most likely reflects falling share prices affecting the value of their packages, and tougher trading conditions that meant executives failed to clear all of the hurdles needed to achieve maximum pay.
The Age analysis differs from an annual chief executive pay report compiled by Ms Byrne's ACSI, and released last month. The ACSI's report, based on the payments to executives of the top 100 companies in 2010, said that median fixed pay of executives rose only slightly from $1.81 million to $1.82 million. The ACSI's fixed remuneration measure includes superannuation, long service leave and miscellaneous short-term perks as well as base pay.
The ACSI also singled out the five best-paid and five lowest-paid chief executives to analyse whether their pay reflected their companies' performances. Mr Lowy's $14.3 million in fixed pay and bonus and the $11.2 million earned by former Leighton Holdings chief Wal King were criticised by the ACSI for being insulated from the effects of performance.
Frequently Asked Questions about this Article…
How much did CEO base pay rise at Australia’s largest ASX-listed companies?
Analysis of reports from most of the ASX 100 showed the median increase in base pay for chief executives was about 9%, rising from $1.47 million to $1.61 million in the latest financial year.
What was the typical cash-in-pocket (including bonuses) for CEOs and how much did it increase?
When short-term cash bonuses are included the median cash-in-pocket for CEOs was about $2.61 million, up 5% year-on-year — roughly a $130,000 increase in actual cash received.
How do CEO pay rises compare with average wages and inflation in Australia?
CEO pay rises outpaced both wages and inflation: the median base pay rise (~9%) was almost three times the consumer price index increase (3.6% at June 30). By dollar terms, the typical CEO cash gain (~$130,000) was more than twice the Australian Bureau of Statistics’ reported average annual wage of about $53,000. Over the year ABS reported wage rises of about 4.7% for males and 4.1% for females.
Which chief executives were the highest paid among the ASX 100?
The five best‑paid chief executives reported were Westfield’s Frank Lowy ($15.96 million), Rio Tinto’s Tom Albanese ($12.75 million), ANZ’s Mike Smith ($10.86 million), BHP’s Marius Kloppers ($10.84 million) and Westpac’s Gail Kelly ($9.59 million).
Did total executive remuneration (including share packages) go up or down?
Median total remuneration, which includes estimated value of share packages, fell by about 1.3% — from $3.57 million to $3.52 million. The decline likely reflects falling share prices reducing the value of long‑term packages and executives not meeting all performance hurdles.
Are shareholders likely to challenge executive pay at company meetings?
Yes. The article says executive and board pay will face increased scrutiny as the annual meeting season begins, with shareholders questioning whether executives should still receive bonuses while investors are suffering from weak markets.
How does this analysis compare with the ACSI executive pay report?
The Age analysis differs from the ACSI report. ACSI’s annual chief executive pay report (based on payments to top 100 companies in 2010) found median fixed pay rose only slightly from $1.81 million to $1.82 million. ACSI’s fixed remuneration measure includes superannuation, long service leave and other short‑term perks, and it also criticised some large fixed pay packages (for example, Mr Lowy’s and former Leighton chief Wal King’s) as being insulated from performance.
What practical pay and performance issues should everyday investors watch for in company reports?
Everyday investors should watch whether CEO pay rises are linked to clear performance hurdles, how much of total pay is cash versus long‑term equity, and how falling share prices affect the reported value of share packages. The article highlights shareholder concern when bonuses appear detached from company performance and notes regulators and investor groups are scrutinising remuneration at upcoming AGMs.
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