Speaker 1:        Welcome to the Guerdon Associates podcast. Today we have a deep dive prepared for you. This episode covers Guerdon Associates original research on remuneration structures across geographical markets and internal company roles. We detailed the numerical changes recorded in executive compensation, non-executive director fees, and total shareholder return percentiles.

Speaker 2:        Yeah, thanks for having me. This is going to be a really thorough examination of how these compensation instruments are designed and implemented across different markets. Right. Because when we analyse these structures, we are observing specific financial mechanisms that boards utilise to align executive outcomes with corporate performance.

Speaker 1:        So before we delve into the figures themselves, let’s establish how these structures vary across geographical borders. We are going to look at the baseline global structures first because I mean, if we think of these compensation packages like architectural blueprints, some regions build with a specific percentage of fixed foundation, while others use different percentages of variable materials.

Speaker 2:        That is an accurate way to frame it. According to Guerdon Associates articles published in December, 2025, distinct components are utilised across different regions.

Speaker 1:        But before we get into the regional percentages, let’s start by explaining the mechanics of a short-term incentive or an STI for the listener.

Speaker 2:        Sure. Mechanically, a short-term incentive is a variable component of a remuneration package. Okay.

Speaker 1:        It

Speaker 2:        Is structured to pay out based on predefined performance conditions measured over a 12 month period.

Speaker 1:        So it’s tied to an annual cycle.

Speaker 2:        Yes. And when we discuss a target opportunity, we are talking about the designated percentage of an executive’s fixed salary they will receive if the company meets those performance metrics at the prescribed target level. Oh,

Speaker 1:        I see. So the fixed salary acts as the structural baseline and the STI target is formulated as a specific multiplier of that baseline?

Speaker 2:        That is correct, and when we review the numbers, we see distinct structural baselines. Geographically,

Speaker 1:        Let’s hear them.

Speaker 2:        In the United States, the median short-term incentive target opportunity is recorded at 165% of salary.

Speaker 1:        Okay. I am going to pause there for a second to let you, the listener process the mechanics of that figure, a median target of 165% of salary.

Speaker 2:        Right.

Speaker 1:        Can you verify the specific percentage figures recorded for Canada compared to the United States?

Speaker 2:        Yes. In Canada, the median target opportunity is recorded at 140% of salary.

Speaker 1:        Okay. 140%.

Speaker 2:        And then in almost all other markets reviewed in Guerdon Associates articles, the median is recorded at 100% of salary.

Speaker 1:        Wow. Okay. Let me restate those. To be clear. 165% in the us, 140% in Canada, and 100% in almost all other markets.

Speaker 2:        Yes. Those

Speaker 1:        Are the target opportunities. How do the maximum opportunities function within these same structures?

Speaker 2:        Well, a maximum opportunity represents the absolute ceiling of the short-term incentive. It is achieved when performance outcomes reach the predefined thresholds.

Speaker 1:        The highest thresholds

Speaker 2:        Right. In the us, Switzerland, and the UK maximum opportunities reach 200% of tolerance.

Speaker 1:        200%,

Speaker 2:        Yes. And in Australia, South Africa and France, median maximum opportunities are between 130% and 160% of salary.

Speaker 1:        Okay. So that covers the short-term mechanics.

Speaker 2:        Okay.

Speaker 1:        But we also need to define the long-term instruments used in these structures.

Speaker 2:        The

Speaker 1:        Research mentions performance share units. Can you explain the structural design of a performance share unit before we get into those percentages?

Speaker 2:        Sure. A performance share unit or PSU is an equity based instrument instead of cash, the executive receives rights to company shares like

Speaker 1:        Actual equity. Right.

Speaker 2:        But these rights vest, meaning they become accessible to the executive when specific long-term corporate performance conditions are met, typically over a three to four year period in Australia, 86% of companies use performance share units.

Speaker 1:        86%.

Speaker 2:        Let

Speaker 1:        Us ground this with an overall monetary figure for a specific global sector. Just to visualise it.

Speaker 2:        Let’s look at the information technology sector globally. The median CEO pay was $16.8 million.

Speaker 1:        $16.8 million. Okay.

Speaker 2:        So synthesising this, the takeaway for a board director is that median target short-term incentives are 165% of salary in the US and 100% in most other markets.

Speaker 1:        Right. And observing how the fixed variable components are designed on a global scale naturally raises a question.

Speaker 2:        Hi. Chose

Speaker 1:        How fixed components changed locally over a one year cycle.

Speaker 2:        Yes. Which

Speaker 1:        Leads us to Guerdon Associates’ original research published in February, 2026, which examines the A SX 100.

Speaker 2:        Yes. The metrics here outline the annual adjustments within that specific market to ensure structural consistency. The figures are based on 73 same incumbent CEOs.

Speaker 1:        Okay. Wait, let us unpack the term. Same incumbent for the listener commuting right now. Sure.

Speaker 2:        What

Speaker 1:        Is the structural necessity of isolating that specific group?

Speaker 2:        Well, when you measure a broad market personnel transitions, introduce variables, an incoming executive might commence on a distinct fixed package compared to an outgoing executive with extensive tenure by isolating same incumbent CEOs, individuals who held the role for the entire consecutive comparative duration, the calculation records, the annual adjustments applied to a continuous employment baseline.

Speaker 1:        Okay, so removing the variance of transitions entirely.

Speaker 2:        Exactly.

Speaker 1:        If that makes sense. It isolates the adjustments applied to individuals remaining in their roles. What were the specific percentage changes recorded for that same incumbent group?

Speaker 2:        Based on those 73 same incumbents, the median annual change in total fixed remuneration was 2.2%.

Speaker 1:        Taking a moment for you, the listener, to catch that, that is a 2.2% change in total fixed remuneration.

Speaker 2:        Yes. Alongside that, the maximum total remuneration changed by 3% at the median.

Speaker 1:        Thank you percent.

Speaker 2:        Furthermore, within that sample of 73 25, incumbent CEOs recorded a 0% change in total remuneration opportunities year on year

Speaker 1:        Wait, really a 0% change for those 25 individuals?

Speaker 2:        Yes, 0%.

Speaker 1:        Guerdon Associates’ original research also contextualises these figures alongside broader economic indices, specifically the wage price index. Let’s just define the wage price index structurally for context.

Speaker 2:        Sure.

Speaker 1:        It is a macroeconomic measure utilised by the Australian Bureau statistics to track the change in the price of labour over time.

Speaker 2:        That is the function of the index? Yes. The wage price index changed by 3.4% over the 12 months to September, 2025.

Speaker 1:        I’m curious about the timeline of these specific metrics actually.

Speaker 2:        Okay.

Speaker 1:        A macro index operates on a calendar schedule. Right. Whereas corporate adjustments do not always align with calendar quarters. Do the 3.4% wage price index figure and the 2.2% fixed remuneration figure cover matching overlapping 12 month timeframes?

Speaker 2:        That’s a good question. They do not match concurrently. The wage price index figure covers the 12 months up to September, 2025 as recorded by the Australian Bureau of Statistics. The CEO remuneration changes, however, are recorded as at the time of each and company’s latest annual general meeting.

Speaker 1:        Ah, I see.

Speaker 2:        So the timeframes intersect during the year, but they’re measured according to distinct annual reporting cycles.

Speaker 1:        Right. Thank you for clarifying those timeline mechanics. The figures also provide a sector breakdown within the A SX 100. Let us look at the material sector

Speaker 2:        By sector materials recorded a 3% median change in total fixed remuneration and a 5% change in maximum total remuneration.

Speaker 1:        Let me just repeat that. The material sector was 3% for fixed and 5% for maximum total.

Speaker 2:        Right. So the takeaway for a board director is that the median annual change in maximum total remuneration for incumbent A SX 100 CEOs was 3%.

Speaker 1:        Okay. Moving forward, having mapped the adjustments to the chief executives package, we can examine how the chief executive structure impacts the next operational level down.

Speaker 2:        Yes. We

Speaker 1:        Are looking at the chief executive alongside the chief financial officer,

Speaker 2:        And

Speaker 1:        This brings to mind almost like a tandem bicycle, right where the front pedals and the backpedals rotate at distinct percentages relative to one another.

Speaker 2:        Yeah. That internal relativity analogy represents the mechanics of executive benchmarking. Well, great. According to Guerdon Associates articles published in May, 2026, we have the specific figures for the chief financial officers don’t

Speaker 1:        Them.

Speaker 2:        For the A SX 100, the median change in total fixed remuneration for CFOs was 3.1%,

Speaker 1:        Could be 0.1% for the CFOs.

Speaker 2:        Additionally, the median change and maximum total remuneration for CFOs was 3.7%.

Speaker 1:        Okay. To understand that tandem bicycle relationship, we need to look at the ratio between the two roles. How is a compensation ratio structurally calculated in this context? Well,

Speaker 2:        A ratio in this context is calculated by taking the monetary value of the CFO’s remuneration and dividing it by the monetary value of the CEO’s remuneration.

Speaker 1:        Very straightforward.

Speaker 2:        Yes. The resulting percentage illustrates the structural proportionality between the two roles. Okay.

Speaker 1:        Let us go through the prior year and current year ratios to see how those figures are recorded.

Speaker 2:        Okay. The ratio of prior year CFO to CEO total fix remuneration was 54.7% at the average

Speaker 1:        54.7

Speaker 2:        And 53.6% at the median.

Speaker 1:        Okay. Letting those numbers settle for a moment prior year average was 54.7% and the median was 53.6%.

Speaker 2:        Yes. Then the ratio of current year CFO to CEO total fixed remuneration changed to 55% at the average and 53.8% at the median.

Speaker 1:        So it moved to 55% at the average and 53.8% at the median. The numbers record the internal relativity between the two roles?

Speaker 2:        Correct.

Speaker 1:        Can you restate the specific baseline numbers isolated for the A SX 20 subset?

Speaker 2:        Yes. Within the A SX 20 subset CFO maximum total remuneration changed by 10.1% at the median

Speaker 1:        10.1 while

Speaker 2:        CEO maximum total remuneration changed by 3.6% at the median.

Speaker 1:        Okay, so 10.1% for the CFO and 3.6% for the CEO within that specific A SX 20 subset.

Speaker 2:        Exactly. And the takeaway for a board director is that the median ratio of CFO to CEO total fixed remuneration changed to 53.8%.

Speaker 1:        Alright. Moving away from internal executive peers, we are now going to guide the conversation to the compensation ratio between the chief executive and the board directors themselves.

Speaker 2:        Okay.

Speaker 1:        And for this, we are drawing on Guerdon Associates original research published in October, 2025.

Speaker 2:        Yes. The figures here track the structural relationship between the chief executives fixed remuneration and the aggregate fees paid to the non-executive directors. How so? Well, in 20 24, 60 1% of CEOs in the A SX 200 recorded fixed remuneration less than or equal to aggregate non-executive director fees.

Speaker 1:        61%. I have a structural question here to clarify that 61% figure.

Speaker 2:        Sure, go ahead.

Speaker 1:        What specific components are included in the aggregate non-executive director fee calculation?

Speaker 2:        Right. The calculation comprises the aggregate fees paid to non-executive directors in each company. This is a total, a maximum monetary limit approved by shareholders at a general meeting. The board then distributes portions of that total pool among its non-executive members as annual fees for their governance duties. Oh, I see. And the figure utilised in this ratio is sourced directly from the annual statutory disclosures.

Speaker 1:        Okay. So it is the distributed aggregate fees from the statutory disclosures compared against the CEO’s fixed pay. Let us look at the historical progression of this ratio over time.

Speaker 2:        Yes. The median ratio of CEO to non-executive director pay was 109% in 2015.

Speaker 1:        Okay. Slowing down for a second, 109% in 2015.

Speaker 2:        Then the median ratio of CEO to non-executive director pay was 89% in 2024.

Speaker 1:        So the median ratio changed to 89% in 2024. Does the structural size of the company alter this ratio? Yes.

Speaker 2:        Guerdon Associates original research categorises this by company size. The median ratio in the top 50% of companies by market capitalization is 81%.

Speaker 1:        81%,

Speaker 2:        And the median ratio is 103% in the bottom 50% of companies by market capitalization,

Speaker 1:        Let me repeat that. For the commuter to visualise the difference, top 50% by market capitalization, the median ratio is 81%, bottom 50%. The median ratio is 103%. Mechanically different market capitalizations require different board structures, which alters the aggregate fee pool utilised in the calculation.

Speaker 2:        Yes. That is how it functions. There are also sector specific figures.

Speaker 1:        Oh, let’s hear them

Speaker 2:        By sector. The consumer discretionary sector recorded a median ratio of 117% in 20 24, 100

Speaker 1:        17%, and

Speaker 2:        The information technology sector recorded a median ratio of 73%,

Speaker 1:        73% for information technology. Okay.

Speaker 2:        So the takeaway for a board director is that 61% of CEOs in the A SX 200 recorded fixed remuneration less than or equal to aggregate non-executive director fees in 2024, having

Speaker 1:        Established the pay ratios between current chief executives, chief financial officers and directors. This logically moves us to the specific metrics recorded when the chief executive position changes hands entirely.

Speaker 2:        Right. CEO succession,

Speaker 1:        Think of it like a relay race where the baton has passed, but the starting metrics for the new runner are recorded at distinct baseline percentages compared to the previous runner.

Speaker 2:        That is a good way to picture it, because when an individual vacates the role and a new individual is appointed, the fixed remuneration baseline undergoes a structural reset,

Speaker 1:        A reset. And

Speaker 2:        According

Speaker 1:        To Guerdon Associates articles published in April, 2026, the transition numbers provide an outline of that reset.

Speaker 2:        Yes, they do. Based on a sample of 52 A SX 100 CEO transitions, the average change in total fixed remuneration between the prior CEO and the new CEO was negative 7.4%,

Speaker 1:        Negative 7.4% on average. That is, let’s let that sit for a moment. Can we look at the distribution of that sample?

Speaker 2:        Yeah. Exploring the percentiles of that sample of 52 transitions, the 25th percentile change was negative 16.2%.

Speaker 1:        Wow.

Speaker 2:        And the 75th percentile change was 0%.

Speaker 1:        Giving you the listener a moment to parse those percentiles. The 25th percentile was negative 16.2% and the 75th percentile was 0%.

Speaker 2:        The numbers also record the total shareholder return percentile ranks surrounding these transitions.

Speaker 1:        Okay. Let us define total shareholder return mechanically for the audience.

Speaker 2:        Sure. Total shareholder return, or TSR is the financial metric. Calculating the return generated by a company shares over a specific timeframe. Right. It incorporates both the change in the share price and any dividends paid out during that window. Assuming reinvestment, a percentile rank then positions that performance relative to a comparator group.

Speaker 1:        Okay. So it measures the combined dividend and share price outcomes and ranks it as a percentile against peer organisations. What were the specific percentile ranks recorded during these CEO transitions?

Speaker 2:        The total shareholder return percentile rank recorded in the six months prior to a new CEO was 38.02 at the average

Speaker 1:        38.02,

Speaker 2:        And the total shareholder return percentile rank recorded in the six months after a new CEO was 43.52 at the average

Speaker 1:        43.52. Okay. I have to ask, do the 38.02 percentile rank and the 43.52 percentile rank apply strictly to the six month windows?

Speaker 2:        Yes. The calculation maps strictly to the six month period prior to a new CEO’s appointment and a second six month period immediately after appointment. Okay. Both our percentile range relative to the total shareholder returns of all A SX 100 companies during those same timeframes.

Speaker 1:        Thank you for laying out the mechanics of that calculation.

Speaker 2:        It

Speaker 1:        Is really helpful to understand how the timeframes are isolated.

Speaker 2:        Of course, the takeaway for a board director is that the average change in total fixed remuneration for incoming CEOs compared to outgoing CEOs was negative 7.4%.

Speaker 1:        As you consider these compensation ratios and return percentiles, you might question how future iterations of the wage price index could intersect with meeting executive fixed remuneration in the years ahead. Thank you for joining the Guerdon Associates Podcast.

Speaker 2:        Thank you.