Our recent research has shown something quite remarkable –the erosion of the landscape of CEO pay throughout Australia but particularly with that erosion down to small firms. According to analysts’ data, the trend of chief executive remuneration has risen and fallen incentivized stock creation. As these trends show, on the whole U.S. states are taking a more cautious approach than their global peers.
Famed CBOE analyst Ed John pinpointed that fascinating trend of the day toward smaller listed companies. He thinks this trend is worth exploring more in depth. “The direction of small businesses is really surprising, so we’ll need to do more research on this,” he said. This underscores the trend toward greater complexity in CEO pay packages as more companies keep steering through the economic storm.
Perhaps the most surprising aspect of the report, judging by media coverage, is the doubling of median CEO pay among smaller listed firms. It increased from $1.74 million in 2014 to $2.2 million in 2024. This sharp increase is evidence not just of the economic environment but changing corporate governance norms on a macro level.
CEO Pay Comparisons
In 2024, median realised pay for leaders of ASX 100 companies was just over $4.15 million. This is in sharp contrast to the increases experienced by the smaller establishments. This figure places Australian CEOs’ earnings at approximately 55 times that of the average Australian worker’s salary. Interestingly, back in 2014, this ratio was even greater, with CEO pay 71 times that of the average worker’s salary.
Shemara Wikramanayake, the CEO of Macquarie Group, has hit the tabloids for being one of the top earners. In the most recent fiscal year, she earned close to $30 million! Likewise, Robert Thomson, head of News Corporation, recently announced an annual salary of nearly $42 million. Together with Lovisa’s Victor Herrero, the pair were among the highest-paid chief executives in Australia last year.
Ed John reminded us that Australia has done a great job of capping salary inflation over the past 15 years. The reality is that recently, especially the last 15 years, has proven we can at least maintain a ceiling on salaries. That has just really not been practical or possible in the US or the UK,” he added. Such a claim is emblematic of Australia’s special corporate governance climate that is more anti-shareholder than what has been witnessed overseas.
Changes Post-Global Financial Crisis
A big part of this change in pay structures for CEOs comes from legislation passed after the global financial crisis. That changed dramatically with the 2009 amendment to the Corporations Act, which made it possible for ousted chief execs. As a consequence, their average payout amounts dropped dramatically. Helen Bird from Sustrans pointed at this as a major change for the better. She continued, “This was a really big problem in Australia. We saw more than $80 million of shareholders’ money paid out to sacked CEOs before the law was amended in 2009.”
Indeed, statistics illustrate a stark decrease in overall termination payouts, now commonly referred to as “golden parachutes.” In FY2024, these payouts dropped to just $8.4 million, an almost $25 million plunge from $33.5 million the prior fiscal year. At the same time, the average payout per CEO dropped by 30% from $1.97 million to $1.4 million.
Helen Bird warned against creating a counterproductive scandal. Many boards in Australia have reacted well and appropriately to concerns over executive pay. In fact, as many Australian boards have risen to that challenge, the counts have dropped drastically. She confirmed with us. This change represents a new level of awareness and accountability with corporate boards as it relates to executive pay structures.
The Future of Executive Compensation
Face value comparisons provide a very rosy snapshot for Australian CEO pay. As Ed John noted, their pay is still quite modest by global standards. He focused on recent instrumentation showing that CEO remuneration in Australia is far lower than the UK and USA. In those countries, CEO pay is allowed to reach as high as 106 times median employee salaries, and more than 300 times for big companies.
This represents a downturn in optimism, and Ed John cautioned that investors are becoming increasingly jittery. In many jurisdictions, these problems are increasingly a matter of course. His remarks highlight an important and continuing conversation among the investment community about the nature of executive pay and how it impacts corporate governance.
While overall compensation for CEOs has soared, base salaries have largely remained flat. Yet, they continue to receive huge bonuses which can account for 60-70 percent of their total pay. Helen Bird remarked on this trend: “What we see is that the fixed rate of pay… hasn’t changed much, but they’re still getting very significant bonuses.”
