Fixed pay for chief executives little changed since law gave shareholders greater power, ACSI says
Termination payments for chief executive officers in Australia have dropped by almost 70 percent since 2008 after legislation required shareholder approval for termination payments exceeding 12 months’ salary, according to a study by the Australian Council of Superannuation Investors (ACSI).
The payments dropped to a median of $1.3 mn in 2013 from $3.5 mn in 2008, the study shows. In that time, aggregate termination payments for CEOs of companies on the ASX 100 Index fell to less than $12 mn in 2013 from more than $83 mn in 2008.
At the same time, the median fixed pay for a CEO of a company on the index declined to $1.83 mn in 2013 from $1.95 mn in 2012 and has remained roughly flat for more than five years, the ACSI says, disproving claims in 2008 that the changes to termination payment laws would sharply drive up CEOs’ base pay.
A series of other changes to CEO pay and benefits in Australia also come from the country’s ‘two strikes’ legislation that was designed to more closely align executive compensation with shareholder interests, the council says. The legislation, enacted three years ago, was part of a drive in the country to strengthen shareholders’ powers.
‘Many other positives for shareholders emerge from the data,’ writes Gordon Hagart, CEO of ACSI, in the introduction to the council’s study. ‘For example, bonus hurdles have become more demanding, signaling a curbing of the culture where bonuses were seen as an entitlement rather than a reward for outperformance. Measurement periods for awards of equity have been extended across the market, better aligning executives with the long-term horizons of investors such as superfunds.’
Hagart adds that ACSI has made fewer recommendations to shareholders to vote against remuneration reports of companies on the ASX 200, underlining ‘the growing commitment of boards to ensure that, whatever the pay structures and incentive schemes used, the overriding purpose of the approach is to deliver value for long-term shareholders.’
