Consider this: In 2013, Chris Lynch, the chief financial officer at one of Australia's largest companies, Rio Tinto, was paid a handsome bonus beyond his base pay for, among other things, engaging with shareholders and ratings agencies.
The following year he was paid a bonus for making new appointments within his finance leadership team and for increasing his level of engagement with investors.
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Some of Australia's highest earning CEO's earned as much as $30 million last year.
As chief financial officer, surely these duties should fall within his standard list of functions.
Let's look at this another way. If he didn't hire staff and he didn't talk to shareholders, Rio couldn't function as a major listed company.
At the risk of appearing to pick on Lynch - who is a highly capable chief financial officer - giving him a bonus for just doing his job properly looks disingenuous.
Rio is by no means alone. Large listed companies have made an art form out of developing new and sometimes bizarre criteria for awarding executives money beyond their base pay and all too often for simply doing their jobs.
They have made a farce of the notion of a performance bonus being a reward for achievements well beyond their peers, or the parameters of their jobs, either financially or in some other respect.
Take Darren Steinberg, the chief executive of Dexus Property Group. Part of his 2016 bonus was awarded to him on the basis he was role model on values, leadership behaviours, collaboration and inclusiveness.
![Rio Tinto's chief financial officer Chris Lynch.](/web/20161001060441im_/http://www.smh.com.au/content/dam/images/g/o/6/v/s/l/image.related.articleLeadwide.620x349.grs3ng.png/1475213621487.jpg)
This was because he was an "Active member of Property Male Champions of Change, a Property Council of Australia initiative to drive diversity in the property industry. (The) CEO is Chair of the Corporate Responsibility, Inclusion & Diversity Committee, which was involved in establishing five wellbeing communities across the Group" .
Sure, his involvement is laudable, but being paid a bonus for it seems strange.
![Part of Darren Steinberg's 2016 bonus was awarded to him on the basis he was role model on values.](/web/20161001060441im_/http://www.smh.com.au/content/dam/images/g/n/n/g/y/y/image.related.articleLeadwide.620x349.grs3ng.png/1475213621487.jpg)
Meanwhile the chief executive of one of the big four banks was given a bonus for adhering to the company's risk appetite statement. One would think that would be a core part of his job - ie risk management.
With annual shareholder meeting season underway - which provides that once-in-a-year forum that affords shareholders the opportunity to have a say and a vote (non-binding as it is) on executive remuneration - the quantum of managers' pay packets and how they are calculated is back in focus.
![Among the largest 100 companies, on average their top executives are getting only one third of their pay packet from ...](/web/20161001060441im_/http://www.smh.com.au/content/dam/images/g/p/j/3/e/q/image.related.articleLeadwide.620x349.grs3ng.png/1475213621487.jpg)
This year, the criteria boards use to measure management eligibility for bonuses is the issue in vogue. And it is no coincidence that this issue has reared its head in a year of lacklustre corporate profit growth.
And there is a view that boards are using performance-based bonuses to game the executive pay system - using any number of spurious measures to deliver a big packet to senior management using the guise of outperformance.
Among the largest 100 companies, on average their top executives are getting only one third of their pay packet from their base pay, another third from short term bonus and the remainder from long term incentives
The chief executives of these firms make on average around $2 million in base pay, but can triple what they pocket each year in pay from long term and short term incentive bonuses.
And of those incentives payments, around 30 to 60 per cent are non financial awarded for non-financial outcomes.
There is plenty of cynicism around the fact that these benchmarks are difficult or even impossible to measure. But that is not necessarily the case. For example the most popular criteria are health and safety - which is easily measurable, and customer satisfaction which is also clearly quantifiable.
"The problem is not so much that non-financial hurdles are soft, or that they sometimes reward executives simply for doing their jobs – the real problem is that at too many companies' executive bonuses, based on financial or non-financial criteria, are an entitlement and not a reward for performance" says Martin Lawrence from Proxy advisory group, Ownership Matters.
His point is that boards need to be hard markers when it comes to assessing the performance of scores of executives, particularly given the non measurable elements of a bonus relies on a board's discretion.
If receiving these bonuses is simply a default position for an executive that has done nothing more than not screw up, then they are tantamount to - as one commentator called it - 'base pay in drag'.