Exec & board salaries swell despite inflation drop

Australia’s largest publicly listed companies have handed their senior executives significant base pay increases over the past year, including an average 14% increase for listed chief executives, data from a new Governance Institute of Australia (GIA) survey reveals.

CEOs from ASX 200 companies receive an average of $1.37 million in base remuneration today, up from $1.14 million last year, the latest figures from the co-authored GIA and McGuirk Remuneration’s Board & Executive Remuneration Report show.

The fixed salaries of managing directors (MDs) within ASX-listed organisations rose by an average of 11%, with MDs from the top 200 companies receiving an average $1.88 million base salary today, up from $1.58 million the previous year.

Around three-quarters of the C-suite received remuneration increases, the data showed, with the ASX-listed firms receiving the highest percentage, at 7.1%.

At the board level, around half of all directors recorded increases in their compensation, with those in the listed and private sectors receiving average bumps of between 8% and 9%.

By comparison, general staff from listed companies received a more modest 5% salary increase.

Also of note, Australia’s Fair Work Commission recently announced a 3.75% increase in the minimum wage – just a little bit above the current rate of inflation.

ASX directors, it was found, spent an average of 40 days each year on board activities, which include meetings, strategy and stakeholder events.

The GIA/McGirk survey of 1,089 boards from across the public, private and not-for-profit sectors also revealed that around half of listed company MDs and CEOs were eligible for performance bonuses.

For MDs, the average maximum bonus was 89%, while CEOs received an average of 93% on top of their base pay.

The rise in average pay for top executives comes despite a notable drop in inflation over the last 12 months – from a more than 30-year high of 7.8% reached in late 2022 to 3.6% in March this year.

GIA/McGirk note that organisational performance was the main metric for base pay rises for unlisted and private companies, while CPI was the main contributor to increases in the not-for-profit sector, which rose by 7% on average.

Governance Institute chief executive Megan Motto said the remuneration bump was “clearly” the result of executives “being compensated for delivering profits and returns for shareholders” with these individuals “making the most of a competitive market for top talent”.

Of note, the S&P/ASX 200 has risen by just under 8% over the past year, hitting an all-time record at the end of March this year. However, pundits are anticipating a retreat for the indices this year, with continuing corporate profit slumps, stubborn inflation and a slowing economy.

Corporate profits have taken a battering in over the last year, dropping 8.6% in the year to the March quarter, ABS figures show.

Motto added, however, that listed companies have also “seen increased shareholder and investor scrutiny of executive pay in the past 12 months which is likely to continue if companies aren’t able to justify such substantial remuneration increases.”

“Against the backdrop of the cost-of-living crisis and with so many doing it tough, it might be hard for many to stomach these figures on an individual basis,” Motto said.

“But it’s crucial to consider these results in the context that the top 200 listed companies range in size from $380 million to over $100 billion, providing jobs for millions of Australians and contributing to strong superannuation returns.”