Egan Associates examined data from 2015 annual reports to investigate how an executive’s bonus level varies based on their fixed remuneration and industry.
In order to conduct this analysis, Egan Associates extracted data for the top 5 executives from companies that were ranked within the top 500 companies by market capitalisation during the 2015 year. Data was analysed both including and excluding zero bonuses.
The results (displayed in Figure 1) show that a high salary is more likely to lead to a high bonus: as fixed remuneration increases in size, bonuses received as a proportion of fixed remuneration also increase.
The difference is marked between high and low fixed remuneration levels – considering only executives who received a bonus, executives receiving over a million dollars in fixed remuneration achieved a median bonus of just under 100% of their fixed remuneration while those on $200,000 to $300,000 received only a quarter of their fixed remuneration. When including executives who received a no bonus, the proportions were around 90% and 10% respectively.
The number of executives receiving no bonus decreased as their fixed remuneration increased, from around 40% for executives earning between $200,000 and $300,000 in fixed remuneration to under 10% for those earning over a million dollars.
Do bonus levels vary between industries? Significantly, although the manner in which they vary is not consistent for all pay levels, as can be seen in the following graphics.
Executives working in Financial Services, Information Technology & Communications, and Consumer industries received higher levels of STI across most pay bands. Bonuses for executives working in the Energy & Utilities, Materials, Industrials and Healthcare sectors were more volatile, displaying low bonus levels relative to other industries for some pay bands and high bonus levels in other pay bands.
A large number of executives in the Energy & Utilities, Materials and Industrials sectors also received no bonus.