CEO pay in the top 100 Australian companies remained moderate throughout the 2012 reporting year, with salary increases remaining low on average. Recently appointed CEOs are being offered lower salaries than incumbent CEOs, as Boards seek to align pay with changing market expectations.
Variable pay was crimped in the year, with the median value of short term cash bonuses and the latest equity grants falling by over 10% for those CEOs who received them.
Pressure on Australian executive remuneration is not a unique phenomenon as we noted in our April newsletter. But is this pressure having the same effect internationally? We have collected global salary reports to provide an overview of how the remuneration attention has been changing CEO pay around the world.
Two surveys on CEO and executive remuneration in New Zealand echoed the Australian experience in part. Fixed remuneration was on the rise, while bonuses were not. Yet the extent of the increase differed, according to the data.
Strategic Pay’s survey covering 3,600 executives found that CEO median fixed remuneration had increased by 9.8% to NZ$315,000 in 2012, while PriceWaterhouseCoopers’ earlier survey covering 1,000 executives (not separated into role) in 131 companies recorded a lower 3.7% median increase.
Strategic Pay found that incentives and bonuses paid to CEOs and MDs had fallen 58%, while PwC found they had decreased slightly.
According to a report from the country’s Globe and Mail publication, the top 100 CEOs by market capitalisation have enjoyed a total average rise for fixed remuneration and cash bonus of 6% (median 3%). The average salary for these CEOs was CA$939,864 and the average bonus CA$1,415,946.
Again, the pattern of depressed bonuses continued, while base salaries rose.
An AP/Equilar study of 323 S&P 500 CEOs who had been in place for at least two years found that median base salary was up 4.4% to US$1.1 million, median cash bonus was down 5.4% to US$1.9 million, median benefits were up 9.4% to US$162,000, median share awards were up 17.2% to US$4.1 million and median option awards were up 16% to US$1.3 million. Equilar takes the company’s estimated value of stock to the CEO at the time they receive it or exercise it.
A Wall Street Journal/Hay study of the top 300 US companies that filed their proxy statement between 1 May 2012 and 30 April 2013 found that base salaries grew 1.3% to US$1.15 million, while annual incentive payments remained flat at US$2.1 million.
This study found that long term incentives increased only by 3.8% to US$7 million (based on the value of incentives at grant), although realised value of LTI grants rose by 39% reflecting the post GFC market improvement.
FIT Remuneration Consultants reported that median salary for FTSE 100 CEOs increased in 2012 by 2.2% to £870,000. The median annual bonus paid dropped by around 17% to £865,000. Interestingly, the study notes that over 80% of plans have a deferral component in Britain, much higher than Australia.
This result was similar to that of Manifest/MM&K, which found that basic CEO salaries for FTSE 100 CEOs rose by 2.5% and notes that total remuneration increased by 10% due to long term incentive awards.
Hay Group noted a 2% increase in salaries for executives in Europe, with CEOs receiving less than 2% across the board. COOs received over 4%.
On a country by country basis, Hay Group found that Switzerland had the highest base salary growth in 2012, almost reaching 5%, followed by the Netherlands at 3% then the UK and France just below that. Germany and Italy did not record salary growth.
In terms of salary level, Hay recorded that Switzerland had high median salaries relative to the European mean, followed by Italy, Germany and the UK. France and the Netherlands had lower than EU median base salaries.
When just looking at the Euro Zone, another study by the Federation of European Employers claimed that Italy and Spain CEOs had the highest median gross hourly pay in Europe, obtaining rates of €953 and €788 per hour respectively. In France it was €655 per hour, in Germany €647 per hour, the report revealed.
Hay Group noted in a report on emerging markets released last year that the level of senior management pay in traditionally low paid regions is catching up to developed nations. According to the report, while senior management salaries rose 38% between 2001 and 2011, salaries in China rose 247% and Brazil 181%. The group also said that South African management roles closed the gap to just 2% less than US salaries in 2011.
A later report from Mercer claimed Asia has comparable executive salaries to US and Europe, based on a snapshot survey of 650 respondents from markets across the region. Mercer believed this was flattening with the realisation that past growth cannot continue.
Our scan of global markets reveals that salary increases of 10% a year are definitely behind us. CEOs in most countries are receiving annual increases of 2% to 5%, reflecting downwards pressure from stakeholders. CEOs are often receiving reduced bonuses or no bonus at all, but are still receiving significant benefits from long term incentive plans where securities were offered at post GFC levels prior to significant growth in share prices over the past three to four years.