Super funds warn they’ll oppose excessive CEO bonuses

The boards of some of Australia’s largest publicly-listed companies have been placed on notice by Australia’s major superannuation funds that chief executive remuneration has exceeded public expectations and that excessive CEO bonuses face rejection.

The industry funds-backed Australian Council of Superannuation Investors (ACSI) has issued the warning on the back of its latest analysis which shows that CEO pay has hit a record high with bonus payments up more than 18 per cent and that chief executives are more likely to lose their job than their bonuses.

Commenting on the research findings, ACSI chief executive Louise Davidson pointed to the lack of public trust in business and the inappropriateness of large bonuses just for hitting budget targets rather than for exceptional performance.

Such an approach was “tone deaf”, she said.

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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,” Davison said, noting that bonuses to ASX100 CEOs were the highest recorded in the history of her organisation’s survey.

She said that 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”.

“It’s a sad state of affairs when bonuses have become such a sure thing,” Davidson said. “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.” 

The ACSI report said many CEOs reaped the rewards of being paid in equity, with strong equity market performance driving a sharp increase in realised pay (which included the value of equity on vesting). 

This occurred in circumstances where the base pay for ASX100 CEOs, the fixed component of their remuneration, showed little growth, reflecting incumbent CEOs receiving modest increases and new CEOs being appointed on lower fixed pay than their predecessors. 

The research noted that, yet again, there were too few female CEOs in the ASX200 (ASX100, 4; ASX101-200, 5) for ACSI to analyse gender pay equality in the survey.