Huge pay bumps for CEOs ‘hard to stomach’ during cost-of-living crisis

Some of Australia’s largest listed companies have rewarded their senior executives with significant increases in base pay as well as bonuses over the past year, according to a remuneration report.

The latest annual Board and Executive Remuneration Report released by the Governance Institute of Australia and McGuirk Remuneration has found that fixed salaries of managing directors across ASX-listed companies increased at an average of 11 per cent, while chief executive salaries rose an average of 14 per cent.

Overall, the median figures are 11 per cent for chief executives and 5 per cent for managing directors.

As inflation and the cost-of-living crisis drastically affected a wide range of Australian workers over the past two years, figures such as these can raise eyebrows and even create some animosity.

​However, the survey of 1,089 boards from across the public, private and not-for-profit (NFP) sectors also showed general staff in listed companies, by comparison, received average increases in fixed pay of around 5 per cent.

Performance bonuses were pinpointed as the reasoning to justify these significant increases, with both managing directors and CEOs from all listed companies being eligible for such bonuses.

The average maximum bonus for managing directors was 89 per cent, while chief executives recorded a maximum 93 per cent bonus on average.

Governance Institute chief executive Megan Motto said senior leaders of publicly listed companies are likely being remunerated for successes as the ASX profits have reached all-time highs.

“Executives are clearly being compensated for delivering profits and returns for shareholders and are making the most of a competitive market for top talent,” said Motto.

“But we have also seen increased shareholder and investor scrutiny of executive pay in the past 12 months, which is likely to continue if companies aren’t able to justify such substantial remuneration increases.”

Other key findings from survey respondents include:

• The average fixed remuneration of an ASX 200 managing director is $1.88 million, up from $1.58 million last year.
• The average fixed remuneration of an ASX 200 chief executive is $1.37 million, up from $1.14 million last year.
• Around half of all board directors recorded increases in their remuneration, with those in the listed and private sector receiving averages of between 8 and 9 per cent.
• Consultant benchmarking was the key criterion for fixed remuneration increases for executives of listed companies.
• Organisational performance was the main metric for base pay rises for unlisted and private companies, while the consumer price index (CPI) was the main contributor to increases in the NFP sector.

The narrative surrounding the findings of this report is hard to ignore. For the average Australian worker, their financial wellbeing and mental health have been tormented throughout the cost-of-living crisis.

As previously reported on HR Leader, a recent report by Amwell found that 67 per cent of Australian workers experience symptoms of anxiety and depression. Respondents said increased work stress and the rising cost of living were contributing to their poor mental health.

Another report highlighted that for the month of March, the number of full-time workers increased by 20,400. People are also working more hours, with the monthly hours worked increasing to 1,929 million, an increase of around 700,000 hours.

While workers scramble and sacrifice to make ends meet, it can be difficult to understand and accept how senior executives are seemingly thriving in what has been a horrendous period for a number of Australians.

“Against the backdrop of the cost-of-living crisis and with so many doing it tough, it might be hard for some to stomach these figures on an individual basis,” said Motto.

Although stomaching that internal rage that Australians have towards this topic can be difficult, Motto believes that seeing the full context of these increases is crucial.

“It’s crucial to consider these results in the context that the top 200 listed companies range in size from $380 million to over $100 billion, providing jobs for millions of Australians and contributing to strong superannuation returns,” Motto said.

​“It will be up to those investors and shareholders to make their voices heard if they feel there are reputational risks in not meeting community expectations.”