Take Caution With Media Reports On CEO Pay

We recommend caution with any media reports on remuneration increases. To date we have observed media reports with skewed sampling, incomplete or misleading remuneration measures, and arbitrary adjustments. Even our own summary included in subsequent articles, which we know to be methodologically sound, will not be valid for a particular company’s purposes. Always insist on data that is valid for your own company. Ideally this involves matching roles with similar objectives and scope in companies of the same size in the same industry.

Our summary is for CEOs across the entire ASX 300 group. Hence it is not valid enough for your company’s particular pay purposes. But we trust it will be a valid indicator of overall trends, and so provide pointers for you in questioning your external or internal remuneration advisers.

Our analyses are different from media reports. Please be aware that:

  1. This data is based on changes in remuneration elements for the (a.) same incumbents who (b.) occupied the same position in (c.) the same company for at least (d.) 2 (e.) full years. We have noticed numerous reports (both privately commissioned and in the media) that fail on the data validity test in at least one of these 5 requirements.
  2. The remuneration measures used are Total Fixed Remuneration, Short Term Incentives (STIs), Long Term Incentives (LTIs) and Total Remuneration. While these are derived from disclosures, they differ from the measures in annual report remuneration tables. The AASB does not require equity to be separated out and reported as a salary sacrifice or package component (in which case it goes into the Total Fixed measure), bonus (in which case it goes into the STI measure), or as a LTI. So various media reports and private surveys we have seen variously report cash salary or cash bonus increases, but not the whole picture. For example, cash salary may go down if the executive sacrifices salary for more shares. Or Total Fixed Remuneration may increase, while cash stays the same, if the board insists that future pay increases be taken in restricted shares. Cash bonuses may be offset or reduced by having to take half in equity. For these, and many other reasons, we analyse remuneration in the format outlined above. In general, the news media does not use this approach.

© Guerdon Associates 2024
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