While it can present a problem when attracting and retaining executives from some countries, Short Term Incentive (STI) deferral is the norm in Australia. Yet, the details of deferral vary. Guerdon Associates looked at the extent and how ASX 100 constituents implemented their deferral policies.

Prevalence

For this analysis, restriction periods (when an award has been vested but cannot be sold) have been treated as deferral.

In FY24, 2 of the current 100 ASX companies did not offer an STI to either the CEO or CFO. Fourteen of the remaining companies did not defer a portion of STI for their CEO or CFO.

Of the companies that do defer the CEO’s STI, Figure 1 reveals that the majority (70%) defer 50% or more of STI. For the CFO (used as a proxy for other executives) the proportion is slightly lower (60%).

Figure 1: Prevalence of deferred portions of STI for ASX 100 CEOs (n=81) and CFOs (n=81) that received deferred STI

Deferral Duration

Figure 2 displays the maximum period of STI deferral for executives in the ASX 100. Most companies deferred STI for 2 years. The most common deferral period for CEOs was 2 years (56%), with CFOs trailing closely behind (54%).

Figure 2: Prevalence of maximum deferral periods (post-performance period) in deferred STI plans of ASX 100 CEOs (n=81) and CFOs (n=81) that received deferred STI

Payment Vehicle

Looking at the companies that deferred or restricted STI after the performance period, 56% deferred CEO STI into rights and 42% deferred CEO STI into shares, as revealed by Figure 3.

Figure 3: Prevalence of different payment vehicles in deferred STI for ASX 100 CEOs

Exercise or trading restrictions

Of executives that received deferred STI in equity, 6 CEOs and 7 CFOs had deferred STI restricted after the required service period was completed. Four companies had a restriction period for CEOs and CFOs without any service requirement in place.

In some countries including the UK, a broader trend has been observed toward reducing or eliminating deferral practice for executives who have already met their minimum shareholding requirements. This contrasts with practices in Australia, where STI deferral remains prevalent even after minimum shareholding requirements are met.

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