CEO pay inflation remains a concern with proxy advisers and shareholders scrutinising CEO remuneration increases.

We investigated CEO salary increases and compared them to the increases in inflation and general workforce increases. This analysis shows whether CEO salary increases, inflation and employee rates of increases are aligned.

ASX 100 CEO remuneration in the last 5 years was sourced from GuerdonData^®, where incumbents who did not hold their position for at least 4 full financial years were removed from the sample. The latest 3-year average change in total fixed remuneration (TFR) was used to measure CEO salary increases. Three-year average data was used to counter any companies making large triennial salary increases, as opposed to smaller annual increases. The 3-year average increase in CPI and trimmed mean (measuring headline inflation and underlying inflation respectively), as well as full time employee total earnings for the relevant financial years were sourced from the Australian Bureau of Statistics (ABS).

Table 1: Three-year average CPI, CEO and workforce earnings increases

 

Median CEO increases were lower than inflation, excepting the smallest companies. Median CEO increases were higher than workforce increases, excepting the largest companies.

To examine how CEO salary increases vary according to company size, the sample was divided into market capitalisation quartiles. This analysis is shown in table 2 below.

Table 2: Company average 3-year TFR change by market capitalisation (n=51)

 

Companies with a market capitalisation greater than $23,520m had the smallest salary increases, while companies with a market capitalisation of less than $6,614m had the greatest salary increases. For companies with a market cap greater than $23,520m, the average change in TFR greater than the 75^th percentile due to the presence of outliers within the sample. Companies with market capitalisation between $6,614m and $13,091m were most closely aligned to the overall sample as per the difference in percentiles.

Table 3 below compares company average TFR change, inflation and employee earnings.

Table 3: Change in TFR vs change in inflation and wages (n=51)

* CPI & trimmed mean to end of FY. E.g. some companies are 30 June FYE and others 31 December FYE.

The proximity of the average salary and inflation difference to 0% implies that CEO salary increases are aligned with inflation. However, the slightly negative result at the median shows CEO salaries falling behind inflation. This means that CEOs’ real salary earnings stayed the same or decreased slightly over the measured period.

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