Egan Associates have conducted detailed remuneration research across the ASX 500 companies at the level of Key Management Personnel. In order to inform boards, CEOs and principal HR executives, we have published a series of comprehensive Insights reports covering:
- Non-Executive Directors: ASX400 and NZX50 (NEDs)
- Chief Executive Officers (CEOs)
- Chief Financial Officers (CFOs)
- Key Management Personnel (KMP) (excluding NEDs and CEOs)
We have also prepared a KMP Reward Relativity Report which provides extensive data and analysis of pay relativity across the different types of KMP.
Our comprehensive analysis provides financial information organised by ASX rank, annual revenue bands and industry sector (see example table below).
Our research has revealed considerable differences between industries and highly varied reward differentials between the market 25th percentile and 75th percentile, influenced by both market capitalisation, annual revenue and industry sector.
Annual Incentive payments appeared if not misaligned, unaligned, with the improvement in profitability having regard to all disclosed and reported remuneration in covering financial years within the 2018 calendar year compared to the prior calendar year.
Our research also revealed a high degree of variability in many segments of the market in relation to the apportionment of total reward having regard to fixed remuneration, annual incentives and equity-based incentives valued adopting annualised carried interest as distinct from statutory disclosures.
Our guidance on the proportionality of reward between fixed annual incentives and long-term incentives is illustrated in the figure below, which highlights CFO reward arrangements on average across the ASX 200 by Industry:
What was also fascinating was the relationship between the CEO’s fixed remuneration as well as his/her total reward compared to a board chairman. This gap in part reflects tradition, though may also reflect issues raised in the Hayne Royal Commission and other observations of regulators that boards in the current environment are focusing increasingly on governance and less on an organisation’s strategy, its development and growth opportunities, its globalisation and its operational challenges including culture.
While disclosing statutory LTI values, we have also calculated the underlying annualised carried interest of equity holdings under long term incentive plans that remained unvested at the end of the 2018 calendar year priced to market at 30 June 2019. The figure below highlights the potential misinformation in statutory disclosures when compared to underlying accruing benefits.
Our research did not however highlight the value of realised benefits at the time a KMP exercised their rights to vested securities granted under an LTI plan which may have been held for between three and five years. Nor did we undertake detailed research highlighting the distortions created where performance rights or share rights were allocated at a substantial discount to the prevailing market based on advice to the board.
While all information is produced in tabular form highlighting reward arrangements in respect of fixed remuneration, annual incentives, equity based incentives and total reward under a number of ASX bands including the top 10, the next 40, the next 50 and then in bands of 100 between 101-200, 201-300, 301-400 and 401-500 (excluding NEDs), we have also compiled information within Revenue Bands including organisations with revenues of <$100 million as well as those with revenues between $100-250 million, $250-500 million, $500 million-1 billion, $1-5 billion, $5-15 billion and >$15 billion.
Our research has also compiled data across the ASX 200 and those companies ranked between 201-500 across eight Industry Sectors including Consumer, Energy & Utilities, Financials, Healthcare, Industrials, IT & Telecommunications, Materials (incl the Resources sector) and Real Estate.
In our report on Reward Relativities, we compare the proportion of KMP reward, including CFOs though excluding the CEO, in relation to fixed remuneration, annual incentives, equity incentives and total reward by ASX Rank, Revenue Bands and Industry Sector. Illustrative of this circumstance having regard to annual revenue is the following:
Illustrative of the manner in which our reports highlight reward differentials differential, is the graph below which compares the value of annual incentives received by CFOs among companies in several industry sectors ranked between ASX 201 to 500.
The breadth of information covered in our research reports is illustrated in the content page of our KMP Report:
We consider our sampling and level of analysis to be the most comprehensive available at this time for KMP, CEOs, CFOs and NEDs.