Disgruntled shareholders set sights on ‘excessive’ CEO pay packets as 2025 AGM season heats up

Australia’s “millionaires factory” and its $24 million CEO have been delivered a humiliating rebuke by investors, with more top companies in the firing line.

Australia’s “millionaires factory” and its $24 million CEO have been delivered a humiliating rebuke by investors, with more of the country’s biggest companies and their highly paid executives set to come under the microscope in coming months.

On Thursday, Macquarie Group shareholders handed the investment bank its first-ever strike — a protest against executive pay when 25 per cent or more of shareholders vote against a company’s remuneration report — citing concerns it had not done enough to rein in eye-watering salaries despite a series of regulatory blunders resulting in a slew of court actions by the financial regulator.

Thursday’s annual general meeting (AGM) saw major institutional shareholders including superannuation fund HESTA, Californian pension funds CalPERS and CalSTRS as well as state investment vehicle SBA Florida, lodge a protest vote.

A second consecutive remuneration strike next year would trigger a vote on whether to force out Macquarie’s board.

Just over 25 per cent voted in favour of the strike. Last year 5.3 per cent voted against the remuneration report, after a major protest vote of 19 per cent in 2023.

The move was backed by influential proxy advisory firms CGI Glass Lewis and Ownership Matters, which advise institutional investors on how they vote.

Macquarie Group chief executive Shemara Wikramanayake was awarded $24.03 million in the year ended March 31, down from $25.3 million a year earlier.

Macquarie Group CEO Shemara Wikramanayake. Picture: Supplied

Ownership Matters said measures to reduce how much profit flowed to Ms Wikramanayake and Macquarie Bank boss Stuart Green did not “appear sufficient” given the long list of regulatory issues, while Glass Lewis said there had been an “inadequate response and transparency on regulatory and risk-related matters”, according to their recommendations circulated ahead of Thursday’s AGM and seen by The Australian Financial Review.

In his speech to investors, Macquarie Chairman Glenn Stevens, the former governor of the RBA, defended the bank’s “risk culture”.

“Risk culture is central, and a great deal of work has been done over the past several years to respond to changes in our business operations and the expectations of regulators and the communities in which we operate,” he said.

“Where shortcomings are identified, the board holds staff accountable, seeks to incentivise future improvement and reflects on what the issue might tell us about the organisation’s culture.”

Mr Stevens added “so far as remuneration impacts are concerned, this will be an FY26 matter, about which the board will come to a view over the period ahead”.

But he acknowledged that “while Macquarie’s remuneration system is strongly supported by shareholders, a number of shareholders have the view that the Board has not adequately reflected risk shortcomings in our FY25 decisions”.

“The board hears your message and will reflect carefully on addressing those concerns,” he said.

As Australia heads into AGM season, Thursday’s strike against Macquarie likely won’t be the last — CEO pay is a growing flashpoint, with a number of the country’s top companies and their executives in the firing line this year.

Whitehaven Coal CEO Paul Flynn. Picture: Supplied

Paul Flynn, Whitehaven Coal

Whitehaven Coal’s Paul Flynn was among the top 10 highest-paid CEOs on the ASX100 last year, taking home $10.68 million on a “realised pay” basis, according to the Australian Council of Superannuation Investors’ (ACSI) annual review of executive remuneration.

Mr Flynn’s pay packet, thanks largely to the coal miner’s unique Single Incentive Plan (SIP), has previously come under fire as “too generous”, with CGI Glass Lewis last year advising shareholders to vote against the remuneration report.

That attempt failed with only 13 per cent support, but Whitehaven has previously been hit with remuneration strikes in 2023 and 2021 of 40.61 per cent and 54 per cent respectively.

Mr Flynn’s pay is likely to come under pressure from again at the October 30 AGM, with advisory firms including CGI Glass Lewis and ISS now considering whether to recommend voting against the remuneration report.

Dexus CEO Ross Du Vernet. Picture: Supplied

Ross Du Vernet, Dexus

Commercial real estate giant Dexus is facing the real possibility of a third consecutive strike at its October 29 AGM.

CEO Ross Du Vernet took home $2.48 million last year, 58.6 per cent derived from bonuses and equity, with his compensation package remaining a key point of contention among shareholders and advisory firms.

Last year’s strike, backed by ISS, passed with nearly 26 per cent but a subsequent board spill vote was easily defeated.

The office landlord and property funds manager, battling through a post-Covid slump, faced a revolt over an abandoned $3 million long-term incentive scheme for Mr Du Vernet.

Recommending against last year’s remuneration report, ISS said Dexus’ short-term incentive scheme had resulted in substantial short-term bonuses for executives “that are misaligned with shareholder outcomes and share price performance at 10-year lows”, The Australian reported.

Star Entertainment CEO Steve McCann. Picture: Max Mason-Hubers/The Australian

Steve McCann, Star Entertainment

Embattled casino group Star Entertainment copped a 43 per cent first strike from shareholders at its November AGM, as it reported a $28 million loss in the first four months of the year.

Mandatory carded play and cash limits, introduced to bolster anti-money laundering controls, have sent revenues plunging at Star’s casinos in Sydney, Brisbane and the Gold Coast, with the company warning of “significant challenges … from an earnings, liquidity and balance sheet perspective”.

Drawing the ire of shareholders were Mr McCann’s generous sign-on and retention packages, which include a $7.5 million sign-on bonus, a $2.5 million base salary, a $2.5 million retention bonus in FY26, and eligibility for an additional $5 million in short-term incentives with no performance hurdles.

Mr McCann’s remuneration is likely to remain under intense scrutiny ahead of the November 14 AGM, amid lingering fallout from a $3.79 million payout to former CEO Robbie Cooke, which included $1.6 million in lieu of notice and a cash-settlement worth $2.19 million of various unvested equity incentives.

Elders CEO Mark Allison. Picture: Weekly Times

Mark Allison, Elders

Agribusiness giant Elders has already faced two consecutive protest votes against its pay practices, with 67.2 per cent voting against the remuneration report last year following a 62.8 per cent strike in 2023.

The triggered board spill vote failed with only 13.5 per cent support.

Shareholders had slammed the company over its botched succession plan and $1 million in cash retention payments to long-serving CEO Mark Allison, whose $3.6 million pay packet, including a $1.4 million base salary, continues to raise eyebrows.

Elders angered shareholders in mid-2023 with the surprise rehiring of Mr Allison, who has been CEO since 2014, after he had announced his intention to leave in late 2023.

The firm said it was left in a difficult situation after an unnamed candidate withdrew in May that year.

Elders’ AGM is scheduled for December 18.

Office workers in the Sydney CBD. Picture: Nikki Short/NewsWire

Investor backlash grows

Glass Lewis, in a February report, noted that pay-related dissent had been trending upwards amid growing dissatisfaction from increasingly vocal shareholders.

The 2024 AGM season saw 40 of the top 300 ASX-listed companies recording strikes of more than 25 per cent.

“This closely mirrors the tumultuous 2023 season, which featured 41 such votes, marking a sharp departure from the range of 22-26 strikes observed between 2018 and 2022,” Glass Lewis said.

The proxy firm noted that strikes of more than 40 per cent remained “significant” with 17 such cases, down from 24 recorded in 2023 but “still considerably higher than the mere five instances seen in 2022”.

“A notable trend is the increase in second or higher consecutive strikes, with 13 companies facing such outcomes in 2024 — accounting for 33 per cent of all strikes,” Glass Lewis said.

“This marks a significant rise from the five companies recorded in both 2023 and 2022, representing 12 per cent and 23 per cent of total strikes, respectively. This shift suggests that boards may be struggling to adequately address shareholder concerns and are facing heightened expectations regarding how they should respond to dissent.”

Glass Lewis added that “on the other hand, the rise in consecutive strikes may also indicate that some boards are more willing to accept shareholder opposition, especially if doing so helps retain key executives”.

It noted that none of the board spill proposals in 2024 received more than 20 per cent support, “indicating that the risk of triggering a board spill over remuneration concerns remains low”.

Glass Lewis identified five main drivers of the 2024 strikes — perceived preferential treatment of executives, flawed or underdeveloped remuneration structures, unchallenging long-term financial targets, excessive remuneration packages and headline risk.

“Generous executive pay, including increases in fixed remuneration and incentive opportunities, continues to face shareholder opposition,” it noted.

“These concerns are particularly pronounced when such increases are not accompanied by clear and demonstrable improvements in company performance or are awarded to executives who already receive substantial compensation.”

ACSI’s remuneration review covering across Australia’s top companies for FY24, compiled with research from Ownership Matters, found average “realised pay” for ASX100 CEOs was 55 times the average earnings of an Australian worker.

Realised pay is calculated as reported pay excluding share-based payments expense but including the value of any equity that vested during the reporting year, using disclosures from annual reports and other ASX announcements.

“The gap between ordinary workers and CEOs widened in FY24 due to the significant increase in average realised pay,” ACSI said.

ACSI CEO Louise Davidson noted in the report that “there will always be outliers, but the long-term trends on fixed pay, realised pay and termination pay show that the diligence of Australian investors and boards has meant that CEO pay levels have generally avoided the pay ‘breakout’ that we see in markets like the US”.

“These efforts must be sustained to ensure that remuneration outcomes match long-term performance, and the value delivered to investors,” she said.

Originally published as Disgruntled shareholders set sights on ‘excessive’ CEO pay packets as 2025 AGM season heats up