The top 100 chief executives have taken a major hit to their annual bonuses of more than 20 per cent on average, to $1.255 million, levels not seen since 2003.
Reported pay for the top-100 chief executives fell to an average of $4.724 million last year, driven by the decline in bonuses and tougher market conditions, according to analysis by the Australian Council of Super Investors.
The focus on executive pay comes as the annual shareholder meeting season kicks off today with an expected protest vote at Alesco, which is the target of a takeover bid by Dulux.
And energy retailer AGL yesterday disclosed that the pay of its chief executive, Michael Fraser, had been increased by 83 per cent to $6.3 million to reflect “improved financial results for the year”.
One hundred and eight companies face a spill of their boards this year if investors trigger a second “strike” under the government’s two-strike rule on remuneration report votes.
“We have spent a lot of time speaking to companies this year and finally we are seeing some lower bonus levels, although close to 90 per cent of CEOs still received one,” ACSI chief executive Ann Byrne said. “But often investors still don’t know what the performance hurdles are because companies won’t disclose them,” she said.
Former David Jones director and managing director at recruitment company Korn/Ferry International Katie Lahey warned that executives taking pay freezes and bonus cuts at major companies, including Qantas, BHP Billiton, Rio Tinto, BlueScope Steel, ANZ and Commonwealth Bank could be headhunted by faster-growing Asian companies.
“A really high-achieving CEO may be in the seat during an economic disruption not of his or her making,” she said. “Some of our very best CEOs are sought after by companies overseas who can offer very attractive packages and we don’t want to give any reason for our top talent to leave us,” Ms Lahey said.
The research showed that the average bonus for the top-100 chief executives fell 8.9 per cent, but some received no bonus at all. Among those that did receive a bonus, the average fell 20.8 per cent to $1.255 million, the lowest level since 2003.
The analysis also revealed that one-third of top chief executives are being paid more than their companies tell investors.
The top-paid chief executive last year was BHP Billiton’s Marius Kloppers, whose reported pay was $11.8 million. He received $17.34 million because of 225,000 BHP shares that vested.
ANZ Banking Group chief Mike Smith was the only other chief executive to clear the $10 million mark. He received $14.74 million because of 330,000 shares received as a sign-on bonus in 2007.
“There is no compulsion for companies to disclose what their CEOs actually take home in pay,” Ms Byrne said. “Some companies voluntarily disclose it and we call on them to do this both in a falling and rising market.”
The analysis shines a light on the sometimes multimillion-dollar discrepancies between CEOs’ reported pay and take-home pay, which companies are not obliged to report.
In a rising market, the total reported pay of CEOs – which includes the estimated accounting value of shares and options– often underestimates executives’ real pay.
Given recent turmoil in the sharemarket, many companies have decided to voluntarily disclose take-home pay to emphasise their CEOs are being paid less than what is reported.
Qantas Airways emphasised that chief executive Alan Joyce’s take-home pay halved this year to $2.28 million. His reported pay rose from $5 million to $5.6 million.
ACSI identified 13 out of 40 examples at top-200 companies last year where take-home pay was higher than reported by the company.
The worst example was Aquila Resources chairman Tony Poli, who was reportedly paid $572,000 last year and received more than $169 million after exercising 5 million options granted in 2005. Other big discrepancies included Gryphon Minerals chief executive Stephen Parsons’ reported pay of $3.25 million and take-home pay of $5.586 million.
Top CEOs take 20 per cent bonus cut
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