In July the Australian Council of Superannuation Investors (ACSI) published its latest annual survey of ASX 200 CEO remuneration based on FY23 public disclosures. Although this survey follows Guerdon Associates surveys of ASX 300 CEO data published in February (see, for example, HERE), it is a useful addition given it also assesses “realised pay”.

The survey report analysed longitudinal trends in “realised” and “reported” pay, fixed and cash-based pay, and annual bonuses. Some data spans as far back as the 2001 financial year.

ACSI’s analysis this year builds upon prior years’ surveys, each of which considered the ASX 200 as it was on 30 June each year. The ASX 200 is bisected into the “large-cap” ASX 100 and “mid-cap” ASX 101-200.

The FY23 sample of ASX 200 CEOs (n=145) excludes CEOs with part-year tenures, and companies with undisclosed CEO pay (whether due to unpublished remuneration reports, being externally managed, or foreign-domiciled).

Foreign-domiciled ASX 200 constituents outside of the sample were still analysed individually, but not used for sample statistics like medians.

Realised Pay

By “realised” pay, ACSI refers to pre-tax pay received by executives, made up of fixed pay, cash bonuses, the value of options with an exercise price (assessed when exercised, rather than when they vest), and the value of zero exercise price options (inconsistently, on vesting and not when exercised).

Findings include:

• In FY23, the median realised pay for ASX 100 CEOs reached the lowest level in the 10 reporting periods during which ACSI has collected realised pay data for the survey, at $3.87m (FY22: $3.93m), reflecting only a marginal decline.
• Mid-cap ASX 101-200 CEOs also saw realised pay slightly decrease, down to a median of $1.95m (FY22: $2.10m).
• The top two US-based companies had CEOs taking home over $40m, and the top two domestic companies saw their CEOs taking home over $20m. BHP trailed close behind at just under $20m.

The relatively high outcomes seen for US-based ASX 200 CEOs were consistent with earlier years, highlighting the differences in pay between US resident CEOs and Australian resident CEOs.

Reported Pay (a.k.a. Statutory Remuneration)

“Reported” pay refers to received statutory remuneration prepared in accordance with Australian accounting standards, as enforced by the Australian Accounting Standards Board (AASB). This accounts for the amortised annual expense of awards that vest over a multiple-year period (e.g., on-foot deferred STIs and LTIs), rather than solely considering pay granted in the year.

Reported pay therefore includes the estimated value of incentives that are yet to vest.

While ASX 100 CEO realised pay saw a median decline in FY23, the opposite trend was seen in reported pay which climbed to record levels, with the median exceeding $5m for the first time. Reported pay for mid-cap CEOs attained a near-record high of $2.25m.

Fixed Pay

In FY23, fixed pay (i.e., salary, pension, and fringe benefits) for ASX 100 CEOs remained largely unchanged at a median of $1.74m, reflecting a 0.1% increase on the prior year. The corresponding median fixed pay for mid-cap CEOs was $1.04m, a 3.1% increase on FY22.

Although ASX 101-200 CEO median fixed pay appears to have kept pace with inflation, the median fixed pay of ASX 100 CEOs in FY23 has fallen to nearly 50% of the FY11 median, adjusting for CPI inflation.

In short, FY23 fixed pay for large-cap CEOs has lost substantial value relative to fixed pay in FY11. Mid-cap CEO fixed remuneration, on the other hand, has increased year-on-year to keep pace with inflation, leading to their fixed pay in FY23 retaining much of the original FY11 value.

ACSI pin down two likely reasons for this:

1. Mid-cap companies have more capacity to grow than their larger counterparts, and so salaries are likely to rise faster; and,
2. There are potentially lower levels of scrutiny on mid-cap companies from investors and the general public, relative to scrutiny placed on large-cap peers.

No other hypotheses are put forward. Other hypotheses may include:

1. ASX 100 CEO appointments are promotions from within on lower salaries than predecessors;
2. ASX 100-200 CEO salary levels are impacted by more external appointments.

Annual Fixed plus Cash Incentive Pay

Like fixed pay, ASX 100 CEO cash-based pay (the sum of fixed pay and cash bonuses) in FY23 remained almost static on the prior reporting period at a median of $2.59m (FY22: $2.77m), indicating only a mild decline.

ACSI stated that fixed and cash-based CEO pay attract intensive scrutiny from investors, since these components of pay correlate the least with shareholder returns. This was identified by ACSI as being the primary factor behind stagnation in fixed and cash-based pay between FY22 and FY23. Other hypotheses not tested in the survey report were that overall performance did not change much, and increases were low.

Annual Bonuses (a.k.a. Short-Term Incentives)

In FY23, 70 of the 75 ASX 100 executives in the sample were eligible for an “annual bonus”, or short-term incentive. Only two of these 70 CEOs (2.86%) – those of Domino’s Pizza Enterprises and Medibank – had zero STI payout.

According to ACSI, this renders it more likely for an ASX 100 CEO to lose their job than to receive no STI payout. The same can be said for FY22, when only one CEO in the ASX 100 sample for that year received no STI.

The chances of a mid-cap ASX 101-200 CEO not receiving their STI was increased, with six of the 66 eligible CEOs (9.09%) in the sample earning zero.

ACSI argues that bonuses are not genuinely at risk, noting that:

• The median ASX 100 CEO in FY23 received a bonus at 66.3% of maximum (FY22: 71%) while for the ASX 101-200 the median was 60.7% of maximum (FY22: 68%), and
• Over the nine years the ACSI study has collected CEO bonus outcomes, the median bonus has been at least 60% of maximum every year for ASX 100 CEOs (other than the COVID-affected FY20).

However, ACSI has not provided evidence for the assertion that bonuses are not at risk at the company level. For example, the same CEOs that received above-median bonuses one year could receive bonuses below median the next year and vice versa without the median for the entire sample changing.

As we illustrate in our article this month summarising our research on ASX 200 STI vesting outcomes the distribution of vesting outcomes was very different in FY23 compared to FY22, suggesting that the variability around the median outcome is in fact substantial (see HERE).

Termination Payments

ACSI’s definition of termination payments includes bonuses for part year worked, the value of long-term incentives that vest solely due to termination, payments made in lieu of notice or for severance, and accrued leave entitlements where leave has not previously been accrued in the statutory remuneration table.

The FY23 data set for the ASX 100 consisted of 17 termination payments, which was the highest number ACSI had recorded since initiating the study in 2008. The mid-cap ASX 101-200 recorded 7 termination payments in the same period. For the ASX 100 CEOs, 12 of the terminations involved payments of more than $1m and 7 of these exceeded $2m.

The total expense of all termination payments in FY23 for ASX 100 executives amounted to $33.52m, which was the largest amount recorded since FY11 ($35.02m). The corresponding cost for ASX 101-200 terminations totalled $6.28m; a historically “ordinary” figure for this cohort.

To view ACSI’s full FY23 research report, see HERE.

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