New research from the Australian Council of Super Investors (ACSI) has shown massive pay packets for ASX200 CEOs dropped during the pandemic – however, they are still earning on average 55 times more than their employees.
Ed John, ASCI’s executive manager of stewardship, said at the beginning of the pandemic in 2020 there were major disruptions to society and the financial markets which influenced CEO bonuses and earnings in several ways.
“Super fund returns were down, share returns were down and clearly there was a whole lot going on out there,” he said.
“At that point, boards reacted and understood what the expectations were and zeroed things out or held back on CEO pay.”
He said the following year, as the share market and the economy bounced back, there was a “bonus catch up”.
“What we are capturing here is the following year, where it fell back down and we use this year-on-year comparison – it was around 98 times the average worker’s salary and then dropped back to 55 times, which is below the long-running average.”
Tracking real earnings
‘CEO Pay in ASX200 Companies’ examined remuneration for top executives at companies publicly listed on the Australian stock market for the 2022 financial year, and found the average pay for ASX100 CEOs has fallen to the lowest levels recorded in the past nine years.
The 22nd edition of the research report factors in realised pay, which is the value of cash and equity received by CEOs and not just the accounting valuations included in annual reports.
Mr John said investors are often thinking about whether they are getting value for money, whether a particular CEO is delivering or if they’re just getting paid a large salary to turn up.
“At Australian annual general meetings, investors can vote on remuneration outcomes and they can elect directors so they’re able to vote ‘no’ where pay isn’t in line with performance,” he said.
“One of the big things we found this year is among Australian boards and investors, there’s probably more accountability on CEO pay and we’ve seen higher ‘no’ votes and people using the two strikes rule on CEO pay where it’s out of kilter.”
The two strikes rule is where a corporate board can be spilled if 25 per cent of shareholders vote against its executive pay proposals at two consecutive annual general meetings.
The CEOs of 11 foreign companies listed on the ASX200 took home on average more than $11 million each in 2022, compared to an average of $4.17 million for Australian-based company CEOs.
Mr John said this is to a certain extent because of larger markets, but there are still “some very large companies based in Australia”.
“The difference is there’s an expectation that you actually have to meet performance hurdles over a longer term in order to earn,” he said.
“Whereas some of the US standards are really almost an expectation that you’ll make these large numbers without necessarily having performed.”
Greg Goodman, Goodman Group founder and CEO, earned $44.43 million and topped the list for Australian CEOs.
Anthony Eisen and Nick Molnar, co-CEOs of Afterpay, set the all-time domestic record when they earned $264.2 million during the 2021 financial year.
Mr John said where boards land in 2023 will be a major test for the Australian market.
“We know about the challenges of the external environment, we know it’s been a really choppy year for markets and a lot of companies,” he said.
“The bottom line will really be if performance is down this year, we’d expect to see bonuses follow.”
Other findings included that Qantas’s Alan Joyce was the only ASX100 CEO to receive zero bonus, although he received an equity allocation which will be worth $4.45 million at current share prices if vested.
A separate report, that only included fixed salaries was published in June by The Governance Institute, and found CEOs salaries at ASX200 companies increased by an average of 15 per cent in the past 12 months, nearly double the inflation rate during the same period.