Remuneration frameworks continue to evolve in response to regulatory developments, market practice and heightened shareholder expectations. This article summarises implemented and planned remuneration framework changes in the ASX 100.

CEO Remuneration Level Changes – more equity, more long term

• Thirty-three companies increased the CEO’s contractual base pay.
• Thirty-six companies have adjusted the CEO’s incentive opportunity.
  • Twenty-six companies adjusted the CEO’s STI opportunity level, evenly split between increases and decreases.
  • Twenty-one companies adjusted the CEO’s LTI opportunity – with 16 increases and 5 decreases. It is worth noting Seek disclosed an increase in the non-performance-based equity granted to the CEO.

Introduction of New Pay Vehicle

Six companies introduced new incentive instruments.

• Five companies introduced share rights in STI instead of cash.
• One company introduced loan-funded shares in their LTI to replace options.

Dexus proposed to introduce LTI options in FY25; however, this was withdrawn due to investor concerns. The company still granted Performance Rights for FY25 and FY26.

STI Deferral – longer

Fifteen companies adjusted their STI deferral period or portion.

• Deferral period: Eight companies extended their STI deferral period, while 7 companies are maintaining their current deferral period.
• Deferral portion: Eleven companies increased their STI deferral portion, 3 companies are keeping it unchanged, and 1 company, Medibank Private, reduced the deferral portion from 40% to 30%.

Other STI Framework Changes:

Performance Measures – simpler, financially weighted, safer but less diversity

• Increased financial weighting
• Removal of softer measures, such as leadership and reputation
• Simplification of scorecards with fewer KPIs
• Shift toward cash-focused metrics, including NPAT, EBIT, OCF, and Cash NPAT
• Removal of STI modifiers, replaced with scorecard-based assessment
• Shift from TRIFR/BIFR to SIFR/LTIFR
• Tougher fatality gates and forfeiture outcomes
• Transition from diversity metrics to engagement indices

Thresholds & Caps – tougher, some reducing maximum

• Higher financial thresholds required to trigger payout compared to prior
• Reduced maximum payouts on financial components

Other LTI Framework Changes

Performance Measures – more gated, growth oriented, but a dose of sustainability

• Shift toward rTSR and EPS
• Removal of ROCE, ROE, FUA, strategic or individual components
• Re-introduction or tightening of ROIC, ROACE, ROFE gates
• More challenging EPS CAGR hurdles and vesting scales
• Sustainability metrics embedded in LTI rather than STI

Other Aspects of Remuneration Framework Changes

Minimum Shareholding Requirements (MSR) – higher

• Increased MSR levels, often materially for CEOs
• Revised MSR calculation methodologies
• Introduction of MSR for executives and NEDs
• Mandatory STI deferral continuing until MSR is met

Equity Allocation Mechanics – face value basis

• Shift from fair value to face value allocation

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