Executive pay growth has ground to a halt with most of the big bank bosses falling out of the top 10 most highly paid chief executives to be replaced by healthcare and property moguls.
Despite Prime Minister Malcolm Turnbull warning against a "cult of excessive CEO remuneration" following the controversy over Australia Post CEO Ahmed Fahour's $5.6 million salary, the average pay for ASX300 CEOs barely rose last financial year and has slowed for the fourth year in a row in line with stagnant wage growth.
Macquarie Bank's chief executive Nicholas Moore topped the list of highest paid CEOs with a pay packet of more than $18 million. Mr Fahour's pay would make him the 32nd highest paid CEO in the country, according to the The Australian Financial Review's annual salary survey of top 300 listed CEOs, ahead of Neville Power of Fortescue and Craig Meller of AMP.
Explore the data: Interactive | Salary survey 2017
High-profile CEOs including Qantas boss Alan Joyce, BHP Billiton's Andrew Mackenzie, Westpac CEO Brian Hartzer and NAB CEO Andrew Thorburn failed to make this year's top 10 list with CBA chief executive Ian Narev alone among the big bank CEOs to scrape in at number 10 on $8.77 million.
The bank CEOs have been replaced at the top by healthcare and property moguls including Ramsay Healthcare CEO Chris Rex, CSL CEO Paul Perreault, Westfield spin-off Scentre group CEO Peter Allen and Westfield's co-CEOs Peter and Steven Lowy, both on more than $10 million, as the CEOs reap the benefits of the ageing population and property boom.
"Since the height of the mining boom in 2012, we have seen a moderation in executive pay generally while CEO pay for property and healthcare companies continues to grow to reflect their position as the new captains of industry," said Daniel Smith, general manager of proxy firm CGI Glass Lewis, who prepared the research for salary survey. The data only includes CEOs who have held the position for an entire annual reporting period.
Exec pay 'a mystery'
The average pay for top 300 CEOs barely rose last year from $2.87 million to $2.88 million after boom-time chief executives such as ANZ's Mike Smith, Telstra's David Thodey and BHP Billiton's Marius Kloppers made way for lower-paid successors and the ASX 200 index fell for the first time in four years, hitting CEO pay across sectors such as retail and media.
![Macquarie Group chief executive Nicholas Moore said: "A material fall in the [US] federal tax rate would have a material ...](/content/dam/images/g/q/x/6/s/n/image.imgtype.afrArticleInline.620x0.png/1486454488972.jpg)
After a 12.5 per cent bump in 2012-13 following the mining boom, CEO pay has moderated over the past four years, rising just 0.4 per cent last year with a slight re-weighting from annual bonuses into long-term incentives.
Boards are under pressure to keep a lid on CEO pay following a fiery shareholder meeting season, record low wage growth for average workers and last week's controversy over Mr Fahour's pay. The business community is nervous that Mr Turnbull might follow changes being considered in the UK to require companies to publish "pay ratios" revealing how much more top executives receive above average workers.
Orica chairman and BHP Billiton director Malcolm Broomhead warned that CEO pay had become a "mystery" even for most executives and shareholders and the system was in need of a radical overhaul.
"Executive pay is far too complex, executives don't understand it so it has very little motivating effect, I'm talking about long-term incentives and I think the average shareholder finds it a complete mystery," Mr Broomhead told The Australian Financial Review.
Business Council of Australia CEO Jennifer Westacott said, "Remuneration packages take account of companies' specific circumstances, challenges and goals.
"Believe me that shareholders have very little tolerance for salaries that don't keep track with company performance or lack transparency in terms of their structure."
Macquarie's millionaire's factory
Macquarie Bank reclaimed their mantle as the Millionaire's Factory, after handing down a record profit last year and elevating Mr Moore to his third year at the top of the CEO pay ranks and a record pay packet of $18.16 million.
Macquarie's top executives also put most CEOs to shame with head of Macquarie's asset management and potential CEO successor, Shemara Wikramanayake the country's highest paid executive on $17.61 million. Macquarie Bank's head of commodities and global markets Andrew Downe received $10.85 million while co-head of corporate and asset finance Garry Farrell and deputy managing director Greg Ward received between $8 million and $10 million.
"Macquarie's pay structures put a significant proportion into deferred pay, so the record pay packets show strong performance for shareholders over a number of years," Mr Smith said.
Other winners last year included Crown Resorts' Rowen Craigie, whose pay jumped more than 200 per cent to $6.24 million, Mineral Resources CEO Chris Ellison, whose pay increased 280 per cent to $2.92 million, and Blackmores CEO Christine Holgate, whose pay climbed 85 per cent to $2.84 million.
Big CEO pay cuts
The retail and media sectors were among the industries hardest hit last year with Wesfarmers' CEO Richard Goyder's pay packet falling 44 per cent to $5.49 million after a horrible year for the retail conglomerate. CEO of Ansell Magnus Nicolin saw his pay fall more than 50 per cent to $1.85 million and Seven's Ryan Stokes was among the year's other big losers after his pay fell 55 per cent to $2.27 million.
"CEO pay remains fairly sticky but it is at least encouraging to see some examples of visible and significant reductions in variable pay after some company's results were nothing to brag about," Mr Smith said.
Cash Converters CEO Peter Cumins was this year's worst-paid top 300 CEO after $6 million worth of options granted in 2011 lapsed after the discount retailer's share price almost halved, resulting in negative long-term incentive values and a negative reported salary of $878,000.
The anomaly – where companies report the accounting value of their CEO's salary rather than their take-home pay – is one of the reasons Mr Broomhead believes the calculation of executive pay had become a "nonsense" which is not properly understood.
"My view is the best way to align management with shareholders is to make them shareholders, so all this stuff with relative TSR and black–scholes analysis to work out what the things are worth is nonsense. The best way is to make them shareholders on day one, part of their salary is paid in shares with a holding lock for, say, five years, that's it," Mr Broomhead said.
"Anything that will simplify executive pay, align it more with shareholder wealth creation and motivate executives has got to be good. I think we are starting to see a shift in the UK and Australia in that direction, which is a good trend."
Listed online job site SEEK and gaming company Tatts Group have led the way in radically simplifying their remuneration structures. SEEK previously doubled the pay of its CEO Andrew Bassat but eliminated his annual bonus which last year delivered him a pay packet of $5.4 million, while Tatts CEO Robbie Cooke received $3.62 million.
Salary survey 2016
- Interactive | Salary survey 2017
- Property, healthcare CEOs top pay ranks
- Meet the richest CEO you've never heard of
- Moderation needed in CEO salary alchemy
- 17 top boards face spill
Feedback: frbi@fairfaxmedia.com.au
