Investors group says decision to pay large bonuses ‘tone deaf’ when overall wages stagnating

This article is more than 2 years old

This article is more than 2 years old

While most Australians are experiencing stagnating wages, chief executives are doing better than ever, with pay up 12.4% for those running ASX 100 companies, to the highest level ever.

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The latest survey by the Australian Council of Superannuation Investors found financial year 2017 was a bumper one for chief executives. Median realised pay (the amount received including equity that vested during the year) rose to $4.36m.

This was partly due to the strong equity markets – some executives’ bonuses are paid in shares or linked to the share price. Bonuses were up 18% – one in three ASX 100 chief executives received 80% of their maximum bonuses, while the median payout was 70.5%.

But the council expressed qualms that the bonuses seemed to be routinely paid and in many cases were not a true performance incentive.

The survey found that all but six of the 80 ASX 100 CEOs eligible for a bonus received one.

Bonuses were a little harder to come by at ASX101-200 companies but they were still paid out regularly – 63 of the 72 CEOs eligible for bonuses received them.

The council’s chief executive, Louise Davidson, said: “At a time when public trust in business is at a low ebb and wages growth is weak, board decisions to pay large bonuses just for hitting budget targets, rather than exceptional performance, are especially tone-deaf.

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“This may be a sign that boards have lost sight of the link between a company’s social licence and the expectations of communities and investors.”



The Reserve Bank governor, Philip Lowe, has expressed concern about persistent low wage growth and its likely long-term impact on Australia’s economic growth.

He said increases in wages of about 2% had become the norm, rather than the 3% to 4% that employees had become used to.

The highest paid executive was Don Meij at Domino’s Pizza. He was paid $36.8m, followed by Peter and Steven Lowy at Westfield, who were each paid $25.9m, and Nicholas Moore at Macquarie Group, who earned $25.2m.

“While bonuses were smaller and harder to get for ASX101-200 CEOs, they still exhibited a remarkably high degree of persistence for a payment routinely described as ‘at risk’,” Davidson said.

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ACSI was unable to draw meaningful conclusions on differences between the pay of male and female chief executives, because women run only four ASX 100 companies and five in the next tier.

Davidson said executive pay would be watched carefully in the 2017-18 reporting season.

“It’s a sad state of affairs when bonuses have become such a sure thing. If this issue is not addressed voluntarily, we may need legislative intervention to give shareholders a greater say – such as we have seen in other markets, like the United Kingdom.

“In light of these results, we will be looking closely at bonus outcomes in the upcoming reporting season. If they’re not transparent and reflective of performance, we will be recommending that our members vote against those remuneration reports,” she said.

This is the council’s 17th survey of chief executives’ pay. The organisation has 38 Australian and international investor companies, which collectively manage $2.2tn under investment. Together they own at least 10% of most ASX 100 companies.

