The annual review of CEO pay for the ASX 100, conducted by the Australian Council of Superannuation Investors (ACSI), also found the increase in fixed pay in the previous five years had not risen above the level of inflation or weekly ordinary earnings.
Between 2007 and 2012, average fixed pay only increased by 3.7 per cent compared to an aggregated inflation increase of 14.5 per cent.
ACSI CEO Ann Byrne said this decline in fixed pay demonstrated the market’s response to shareholder concerns regarding the continual increase of pay.
“One reason for the drop in fixed pay is that we have seen many boards reviewing remuneration packages when they hire new CEOs, often bringing them back in line with market expectations. This is a welcome trend and one which investors would like to continue,” said Ms Byrne.
The average fees paid to board chairmen also declined in 2012, with a decrease of 3.5 per cent.
ACSI research also indicated a recent decline in the number of CEOs receiving an annual bonus, with fewer Top 100 CEOs receiving a bonus in 2012 than in any other year since 2003. While the average did rise by 4.8 per cent, this was mostly due to Westfield’s co-CEOs being included in the sample. The median bonus for CEOs in the ASX 100 decreased for the third year in a row, down 3.5 per cent to $1.06 million.
Westfield’s co-CEOs, Peter and Steven Lowy, collectively received the highest amount, with a statutory pay of $21.08 million and a realised pay of $19.34 million. ANZ CEO Mike Smith received a realised pay of $19.17 million.
Ms Byrne said a decline in bonuses was also the result of increased investor vigilance.
“Dialogue between investors and directors is resulting in boards getting the message on pay. It even seems that annual bonuses are becoming more at risk,’ she said.
Large termination payments also declined, with the average termination payment to a CEO in the Top 100 at $1.47 million, half the 2011 average of $2.92 million.
“ACSI’s view is that the shareholder vote on termination benefits has been a sensible market-based reform. In response to voter and investor expectations, boards have brought contractual terms back in line with market expectations,” she said.
In contrast to the Top 100, average fixed pay for companies in the ASX 200 rose by 4.7 per cent in 2012 to $974,000. There was, however, a decline of 4.6 per cent in average CEO bonuses for companies ranked between 101 and 200, resulting in a decrease of $402,000 from 2011.
