ACSI releases survey results on CEO pay

The Australian Council of Superannuation Investors (ACSI) released its annual top 100 company CEO survey results on Monday 5 September 2011.

The release of these results is timely, and complements the Guerdon Associates review published every December (see, for example, HERE).

The ACSI data is based on 2010 financial year disclosures.

This summary focuses on the ACSI findings on a same incumbent basis that is, the differences in pay from one year to the next for people who occupied the same CEO position for two full years. This is the most valid basis for comparison, and matches Guerdon Associates review method (notwithstanding that there are some differences in how pay is measured).

On this basis, there were 57 incumbents in the ACSI sample. Key points include:

  • CEOs who are in the job for two or more years generally receive more pay than individuals who are more recently appointed. This is because most new appointments are internal promotions. Internal appointees are of unknown worth as a CEO. In addition, their pay prior to promotion is generally about half that of their predecessor. So boards tend to be conservative on appointment, and wait to see the new CEO prove his/her worth.

  • The median fixed pay increase, according to ACSIs review, was 3.1%.

  • STIs increased 12.1% 37 of the 57 saw their bonuses increase in 2010 relative to 2009, with another receiving an unchanged bonus.

  • Pay and annual bonus combined rose 10.2%. While ACSI does not state this, this is less than the median earnings per share increase in ASX100 companies, at about 17%. This is also likely to be considerably less than the company earnings increase for same incumbent CEOs, given the more successful CEOs tend to retain their jobs.

  • ACSI did not analyse the value of LTI grants made in 2010, and compare these to 2009. Their analysis of the accounting value of LTIs seems to support the contention that the rate of LTI grants is increasing. They did undertake an analysis of the actual value of LTI that vested. But the analysis could have done with further work relating this to multi year performance.

The report makes interesting reading, if only to be more familiar with ACSIs interpretation of the data and their evaluation as to what it means. As the representative body of $300 billion in industry superannuation fund assets, ACSI has a significant influence on, and/or represents, an influential investment community. However, by itself, their report does not provide enough detail for most boards to arrive at a judgment as to what is a suitable pay adjustment, if any, tailored for their own CEO.

The ACSI report can be found HERE

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