Company Size Makes a World of Difference to Bonuses

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CEOs of SMEs are by no means guaranteed an annual bonus and, in fact, the CEOs of most companies ranked 401 to 500* did not receive a bonus in the 2014 year.

Following interest in our analysis last month of actual STI awards for CEOs of top 100 companies, we repeated the process for companies ranked 401 to 500.

In the top 100 companies, 96 companies were included in the analysis. The exclusions were companies that had undergone structural transitions complicating remuneration. For companies ranked 401 to 500, 88 were included in the analysis. The exclusions were companies that had recently listed via IPO/reverse takeover or had no CEO at year end.

The results of the analysis were vastly different as can be seen in the table below:

TableSTI

The distribution of maximum STI opportunity as a percentage of fixed or base remuneration for companies that provided comprehensive disclosure is depicted by the following figure:

Maximum STI

The amount of STI actually paid as a percentage of fixed remuneration including zeros is shown in the figure below#:

ActualSTIinclZeros

The amount of STI actually paid as a percentage of fixed remuneration excluding zeros is shown in the figure below#:

ActualSTIexclZeros

There are four main observations that can be gained from these comparisons:

  • Disclosure of remuneration targets and maxima is scant in the annual reports of low ranked companies.
  • The award of a bonus is less frequent in lower ranked companies than in top companies.
  • The proportion of remuneration that can be earned as an annual bonus in SMEs is much lower than that for larger enterprises.
  • Once awarded, the proportion remuneration that comprises an annual bonus is also significantly reduced in lower ranked companies in comparison to the top 100 companies.

*Companies were ranked by market capitalisation as at 31 March 2015 using 22 day smoothing.
# The actual short term incentive of the CEO of Arowana International was excluded as an outlier due to the large nature of his award.

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