Average fixed pay of Australian CEOs down 3.3% at $1.86 million
CEO pay gap with ordinary wage earners in Canada in 2014 was so huge that by lunchtime of Jan 2, the chief executive’s pay is equal to the yearly salary of the ordinary worker. In Australia, the disparity has been reduced, although the average fixed pay of the Aussie CEO of $1.86 million would be an aspirational amount for the average wage earner.
An analysis by the Australian Council of Superannuation Investors (ACSI) says at $1.86 million, the average fixed pay is down 3.3 percent on previous year from $2.09 million. The lower compensation is a deliberate action by boards to hire new chief executives with lower pay packets, reports Business Insider Australia.
Among CEOs of the ASX 200 companies, the decline was bigger at 4.6 percent, bringing down their average fixed pay to $1.51 million. Among the chief executives of ASX 100 companies, the $1.86 million is the lowest in almost one decade.
Although their fixed pay may be shrinking, long- and short-term incentives in the form of bonuses and share allocations – which ordinary workers normally do not get – make up for the lower salary. Since 2008, 93 percent of ASX 100 CEOs were given bonuses, with a median of 76 percent of maximum.
Commenting on the hiring of new CEO with smaller pay packets, ACSI CEO Louise Davidson explains the results of their 15th yearly study on CEO pay. “The fact that boards are appointing new CEOs on less money shows the monitoring and engagement by asset owners and institutional investors has had a positive outcome on executive pay, forcing real declines over time,” says Davidson.
Despite the lower pay, Davidson points out the community believes CEO pay is still out of step since it represents “many multiples of ordinary people’s wages.” She adds if boards do not keep a tight rein on management rewards, it would risk investor backlash.
Davidson notes the high proportion of CEOs getting three-quarters of their bonuses places a big question mark on appropriateness of bonus hurdles. “This begs the question – are bonuses really just fixed pay dressed up as at-risk pay?” she asks.
For Davidson, bonuses should be a reward for exceptional performance and not just for performing their day jobs, reports The Australian.
VIDEO: Average CEO Pay vs Worker Pay: 204 to 1
Source: Bloomberg
