The real story on 2009 CEO pay – median increases of 1.5% with large reductions in performance pay

Recent media reports single out individual CEOs who have received large bonus payments or large base salary increases.  But when we look at the overall data, a significant number (43%) of CEOs have suffered a reduction in their total remuneration.

The 2009 statistics confirm that “at risk” remuneration really is at risk with median short and long-term incentives shrinking.

This article looks at the changes to CEO remuneration from 2008 to 2009.


We selected ASX 300 CEOs with 2009 disclosures (up to September 30 financial year end) from GuerdonData® and analysed the change in remuneration between their 2008 disclosures and 2009 disclosures.  There were 138 individuals who occupied the same CEO role over that period in our analysis.

Notes on methodology

CEOs were excluded if:

  • Their remuneration was most recently disclosed prior to January 2009
  • They were not in the CEO role for the whole of the past two financial years
  • Their disclosed remuneration has been significantly impacted by structural change during the period

The following abbreviations are used throughout this document:

  • TFR: Total Fixed Remuneration including salary, fringe benefits and superannuation and any other remuneration that is not variable with performance
  • STI: Short Term Incentives, which is pay contingent on performance measured within a 12 month period.
  • LTI: Long term Incentives, which is pay contingent on performance over a period greater than 12 months (typically 3 or more years).
  • TR: Total Remuneration, which is the sum of the above.

Guerdon Associates applies a rigorous and consistent definition of STIs and LTIs throughout our analysis.  Therefore our results will be different from analyses reported in the media that have assumed that equity compensation is long term, or that companies’ own definitions of long term are consistent across companies.  Both these assumptions are wrong.

To qualify for a LTI, the award must be performance hurdled to be considered an incentive and must have a performance period longer than 12 months to be considered long-term.  Therefore, time vested grants of equity and retention incentives are deemed to be fixed remuneration (i.e. not variable with performance).  Additionally, incentives with just a 12 month performance period are deemed to be STIs, even if the award is deferred for a longer period.

These definitions impact the movement in remuneration.  If, for example, an organisation has made un-hurdled (time vested) option grants in the past and subsequently introduces performance hurdles, then the fair value of the grant changes from fixed remuneration to LTI, hence impacting the year-on-year trend.  That is, fixed remuneration is reduced and LTI is increased.

There are two ways of estimating the change in remuneration over time.  One is to analyse the individual percentage change in remuneration (incumbent weighted) and the other is to analyse the change in aggregated statistics, like average, (remuneration weighted). In the first case, the change in remuneration for each CEO has equal weighting in the analysis.  In the second, the changes in the remuneration of highly paid CEOs will have a stronger influence on the outcomes than the same remuneration change in a lower paid CEO.  We use both methods in our analysis.

Companies were grouped using two criteria.  The first was company size and the second was the Global Industry Classification System (GICS) sector and industry.  Company size was defined using market capitalisation and the companies were grouped according to size into quartiles. 

The following tables summarise the segmentation.  There are thirty-four or thirty-five companies in each quartile group.

Change in Remuneration from 2008 to 2009

The median increases in TFR and TR are 7.0% and 1.5% respectively.  These are significantly lower than our results in 2008 that were 11% and 15% respectively (see HERE).

The following table summarises the incumbent weighted increases in CEO remuneration between 2008 and 2009.


Changes in STIs and LTIs cannot be calculated accurately using incumbent weighted data because it is not possible to calculate sensible increase when an individual is paid an incentive in 2009, if no incentive was paid in 2008.  Alternative analyses are included later in this paper.

The proportion of CEOs who received an increase in remuneration was 52%, significantly lower than the 2008 proportion of 70%.  That is, almost half received no increase, or a decrease in pay.

The proportion of CEOs whose remuneration increased, decreased or stayed the same is shown in the graph below.  CEOs who did not receive an STI or LTI in either year are included in the “Stayed the same (zero)” category.


The remuneration-weighted statistics vary from those above in Table 3.  The median TFR increased by 12% and the median TR increased by 4%.  These are based on the change in aggregated data for same incumbent CEOs from 2008 to 2009.  The median STI has decreased by 18% and the median LTI has decreased by 20%.  (The statistics relating to STIs and LTIs are based only on the incumbents who received them.)

TFR has experienced modest growth while other components of remuneration have decreased or stayed steady.  On average LTIs have decreased by about the same amount as TFR has increased.  This leaves TR about the same as 2008, although the reduction in the 75th percentile suggests that the larger remuneration packages have been harder hit than the more modest ones. The following graph shows the inter quartile range for TFR, STI and LTI for both 2008 and 2009.


Change in Remuneration Structure

Overall, at risk remuneration has reduced from 2008 to 2009.  The reduction in STIs accounts for most of this.  The structure reported last year for 2007 is included for reference. However, the incumbents are not identical to the ones used in the 2008/2009 analysis.  The following table summarises the changes.


The reduction in STIs reflects the short-term impact of the global economic crisis.  This has resulted in fewer STI payments, rather than a reduction in average size.

The reduction in LTIs reflects the “fair value” write offs of LTIs that have failed to vest because performance hurdles have not been met.  There has been a small reduction in frequency as well as average size of award.  The following table summarises the change in frequency of incentives.


The overall trend changed when we analysed the remuneration mix by company size.  CEOs of mid sized (i.e. Q2 and Q3) companies, were the biggest losers in terms of losing their STIs. The graph below illustrates the change.


There were small reductions in the percentage of CEOs receiving LTIs in all company size groups.
The following graph shows the proportion of remuneration that is TFR, STI and LTI over a two-year disclosure period by company size quartiles.


The change in remuneration mix also varied by sector, as seen in the graph below.


The only sector to experience an increase in all components of remuneration was the energy sector.  This was also the only sector to increase average STI payments significantly (+35%).  The industrial sector had the largest reduction in STI size (-19%) and the materials sector had the largest reduction in the percentage receiving an STI, going from 56% in 2008 to 31% in 2009.

The industrial sector has halved the average LTI values.  The percentage receiving LTIs has also decreased. 

The finance sector was the one group to experience a reduction in average TFR from 2008 to 2009.  The property industry accounts for most of this reduction.

Health care and IT have small sample sizes and cannot reliably be used to make inferences about remuneration trends.

© Guerdon Associates 2021
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