How variable is variable pay?

August 11, 2025

Remuneration boils down to an exchange of value between the shareholders and management. It is fair to expect that value created for shareholders is proportionally matched in remuneration for management. Given that the idea of proportionality is easily scrutinised when remuneration is largely fixed, remuneration has trended towards holding more weight for variable components.

In FY24, short-term incentives (STI) were 36% of ASX 100 CEO fair-value maximum remuneration at median and long-term incentives (LTI) were 38% of maximum remuneration at median.

To determine whether incentives are sufficiently “at-risk”, we have leveraged our data to analyse the distribution of vesting outcomes of at-risk pay in the ASX 100 over the past 3 years.

Our analysis found that over the past 3 years in the ASX 100:

  • 52.2% of STI outcomes were at or above their respective target opportunity.
  • 74.9% of STI outcomes were at or above 50% of their respective maximum opportunity.
  • The median STI target opportunity as a % of maximum was 66.7%.
  • 48.3% of STI outcomes were at or above the group median target opportunity as a % of maximum opportunity.

Other findings included:

  • STI vesting was 66% at median and 63.2% on average.
  • STI outcomes of 100% vesting were about twice as prevalent as nil vesting in the sample.
  • The most prevalent decile for outcomes contained the median target opportunity. Figure 1 shows the relative frequency distribution of STI outcomes.

Figure 1: Distribution of 3 Years of STI Vesting Outcomes in the ASX 100 as % of Maximum

LTI vesting outcomes were 55.5% vesting at median. Average vesting was 55.6% and its proximity to the median suggests symmetry in the distribution.

Figure 2 indicates LTI vesting appears to be trimodal, with peaks around 0%, 50% and 100%. This may be the result of a greater prevalence of market measures and performance gateways. Not every company can “win” in market rankings and hurdles for threshold vesting for market tranches are typically set higher than non-market measures, all else being equal.

Figure 2: Distribution of 3 Years of LTI Vesting Outcomes in the ASX 100 as % of Maximum

See HERE for our previous article on how likely incentives are to vest.

See HERE for a summary of the 2025 ACSI release review of ASX 200 CEO pay.