Share bonuses are up, but aren’t worth what they used to be for CEOs of ASX companies
Equity packages are meant to align CEO strategies with a company’s long-term outlook. But bosses might prefer more of their pay in cash in a falling sharemarket.
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They’re certainly not underpaid, but the pay packets of Australian CEOs aren’t quite as stuffed full as they once were thanks to the bear market.
Chief executives and company bosses got bigger bonuses than in the past year, a new report has found, and those bonuses were closer to the maximum they are able to be paid under remuneration plans than ever before.
An Australian Council of Superannuation Investors report to be released on Wednesday shows the average bonus awarded to an ASX 100 CEO hit $2.31m in 2021, but fixed pay is declining.
But while total realised pay, the amount of cash and the value of share parcels at the time of their awarding to bosses, rose across Australia’s biggest companies according to their most recent annual reports, boards are holding down fixed remuneration while raising equity awards to their CEOs.
The median ASX 100 CEO was paid $2.8m cash, up from slightly less than $2m in pandemic-hit 2020, but the five-year per annum change is only a 1.5 per cent increase. Over 10 years it has fallen 0.5 per cent.
The only ASX 100 CEO with cash pay of more than $5m in 2021 was former Magellan Financial boss Hamish Douglass, although $2.72m of his $5.22m cash remuneration was deferred bonuses from previous years paid recently.
Meanwhile, median and average bonuses have increased at about double the rate as cash payments over the past five years. The biggest bonus among ASX 100 CEOs was the $19.85m profit share awarded to Macquarie’s Shemara Wikramanayake, though only 20 per cent of that figure was in cash.
The median bonus awarded to an ASX 100 CEO for the 2021 financial year was $1.76m, up from $1.14m in the previous year. This was second only to the 2017 median of $1.76m over the past 11 years, the study found. The median bonus for an ASX 100 CEO as a proportion of the maximum they could receive rose from the record low 31 per cent in 2020 to 76.7 per cent, the highest outcome in seven years of the ACSI report.
With many ASX stocks plummeting since the beginning of this year, suddenly those equity-based payments aren’t quite as lucrative on paper as they once were.
Many of the equity awards detailed in the report were received during the bull market of the past two years, including outliers Anthony Eisen and Nick Molnar of Afterpay. Afterpay’s 2021 annual report, the last the buy now, pay later pioneer lodged with the ASX before it merged with Block in an all-scrip deal finalised in January, shows both Eisen and Molnar had combined “realised pay” of about $264m. But the duo each were paid fixed remuneration of $442,500 and a $300,000 cash bonus, with the bulk of the remainder in $1 share options they exercised when Afterpay stock was worth $90. It dropped about 30 per cent before the all-scrip Block deal. Block shares are in turn down about 47 per cent since January.
“In recent engagement, ACSI has found that many boards are considering retention payments for senior executives, ostensibly to offset the perceived threat of competition for talent, but often in situations where existing incentives have failed to vest,” ACSI chief executive Louise Davidson said, adding that her members were focused on the long-term sustainability of the companies in which they invest. “Remuneration structures that result in short-term thinking or drive perverse behaviours, usually leave investors picking up the cost.”
ACSI said termination payments of $32.05m to departing ASX 200 CEOs in 2021 was down slightly less than $1m from the previous year. The biggest payout was $4.99m to ex-Woodside boss Peter Coleman, though the $4.85m shelled out to ex-Crown Resorts CEO Ken Barton, who left after the NSW inquiry into the casino group, was described as “controversial” given he got $1.5m under a six-month consulting agreement.
Originally published as Share bonuses are up, but aren’t worth what they used to be for CEOs of ASX companies
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