Fatalities attract great scrutiny from institutional investors, and especially industry superannuation funds. Directors and senior officer liabilities for poor safety outcomes and conduct are significant, and in some cases a criminal offence. It is a key component commonly used in executive incentive scorecards to enhance workplace safety.

This is accompanied by an expectation that executives should face accountability through remuneration reductions for fatalities within their control. But, how sizeable should it be? And would this be significant enough for shareholder voting support?

To determine whether remuneration consequences arising from fatalities have an impact on shareholder activism, we examined instances of reductions in executive pay due to fatalities in the ASX100 across FY24 and FY25.

There were 9 companies within the sample that disclosed fatalities and some form of adjustments to remuneration outcomes. Four companies were in the industrials sector while the remaining 5 were in the materials sector.

All 9 companies reduced executive pay outcomes through reductions to short-term incentives, ranging from 10% to 30% of the outcome with 10% as the most frequent. These reductions were commonly applied through board discretion or captured from pre-existing formulaic fatality gateways.

Three companies reduced the STI through a zero-fatality gateway affecting the safety component of the scorecard. One company applied a further discretionary reduction on top of the reduction from a zero-fatality gateway for their safety component of the scorecard.

The entire executive team was impacted in all instances, though 1 company recorded different levels of pay reduction that varied with position. In this instance, the CEO recorded the highest reduction, followed by the executive heading the region, and then equally for the remainder of the executive team.

The number of fatalities varies across the 9 companies, ranging from 1 to 5 and with a median of 2. One company recorded 5 fatalities and decreased scorecard outcomes by 10%, consistent with other companies that recorded a single fatality.

Figure 1: STI outcome reduction due to fatalities by voting outcomes against the remuneration report across FY24 and FY25

Figure 1 shows that there is no clear relationship between AGM voting outcomes and remuneration consequences due to fatalities. For companies with lower reductions of around 10%, votes against the remuneration report were generally under 5%, while the company that reduced STI outcomes by 30% on top of a 10% forfeiture from a zero-fatalities gateway received a strike. In this case, widespread media coverage disclosed that the strike was tied to recurring fatalities across multiple years and insufficient actions taken to improve the situation rather than executive pay outcomes for the fatalities in the current year.

This suggests that an appropriate level of reduction not be formulaic, but needs provision for a discretionary overlay.

See HERE for our previous analysis on fatalities and executive pay outcomes.

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