This article looks at the changes to ASX 50 CEO realisable remuneration from 2012 to 2013. The analysis is based on 24 CEOs who were in the position for both financial years. It relates only to companies that have published 2013 remuneration reports.

 

Realisable pay includes fixed pay and cash STI relating to the disclosure period, along with the value of vested deferred STIs and vested LTIs.

 

Overall, realisable total remuneration (pay) is lower than disclosed (statutory) total remuneration. The average ratio of realisable pay to disclosed pay was 88% in 2013, an increase on the 82% in 2012. Larger companies are more likely to have realisable pay that is greater than disclosed pay, although this is also related to finance sector data.

 

Realisable pay outcomes

 

Overall the median increase in realisable pay from 2012 to 2103 was 10%.

 

Table 1 shows the overall statistics for both years. The percentage change is calculated for each CEO then the statistic is calculated. The data is therefore incumbent-weighted. The difference between the average realisable pay each year would be remuneration-weighted and higher paid CEOs would have significantly more impact on the result than lower paid CEOs.

 

Table 1: Realisable pay for 2012 and 2013

 

There was a wider range of outcomes in 2013 than in 2012. The increase contrasts with an average 2% increase in disclosed pay for the same CEOs over the same period.

 

Realisable pay was three times more likely to increase (67%) than to decrease (21%). Whereas disclosed pay was almost equally likely to increase (46%) or decrease (42%).

 

Relationship to company size

 

Figure 1 shows the ratio of realisable pay to disclosed pay for 2012 and 2013, plotted against current market capitalisation. Ratios over 100% indicate that realisable pay is greater than disclosed pay.

 

Figure 1: Ratio of realisable to disclosed pay in 2012 to 2013 by company size

 

This outcome may be a result of the predominance of banks at the high end of the graph. Overall, the finance sector, which makes up one third of the sample analysed, had realisable pay levels of 98% of disclosed pay (90% in 2012). The remaining companies had realisable pay levels of 77% of disclosed pay (73% in 2012).

 

Relationship with company performance

 

It is problematic to apply one performance measure to all companies and realisable pay can be impacted by the tenure of the CEO. For example, even if the CEO has been in place for two years, it is possible that no LTI or sign-on equity has vested. However, we would still expect to see higher ratios of realisable pay to disclosed pay for higher performing companies.

 

Figure 2 shows the weak overall relationship between the ratio of realisable pay to disclosed pay for 2013 and 2012 plotted against three-year TSR. Significantly, there has been an improvement since 2012. Again the finance sector stands out. The average annualised three-year TSR for the finance sector was 21%, compared with 9% for all other sectors.

Figure 2: Ratio of realisable to disclosed pay in 2012 to 2013 by 3-year TSR

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