The standard of governance among listed Australian companies leads the world, states the Australian Council of Superannuation Investors’ (ACSI), after it unveiled progress on checking excessive pay.

ACSI’s annual survey on chief executive pay shows median termination payments at Australia’s largest listed companies have shrunk from $3.5 million in 2008 to $1.3 million in 2013.

As a result, annual costs to ASX100 companies have fallen from $83 million paid in termination payouts to 13 CEOs in 2008, to nine payments totalling just under $12 million in 2013.

Median base pay for S&P/ASX 100 CEOs has also fallen to $2.53 million, its lowest level since 2006.

ACSI chief executive, Gordon Hagart, hailed the figures as a sign of an end to an entitlement culture and a sign of more demanding bonus hurdles and longer performance measurement periods.

“In Australia, we have done well compared to the US and UK in curbing extreme excess. Australian investors get better value for money out of their executives and could easily claim to be in number one place [for corporate governance].”

He attributed the success to the move to bring in shareholder voting on remuneration in 2005, the need to consult investors on termination payments larger than one year’s pay in 2009 and the two strikes rule in 2011. The latter threatens a company’s board with having to apply for re-election, if remuneration reports receive a 25 per cent no vote from shareholders over two consecutive years.

He saw the figures in the chief executive pay survey as a vindication of his organisation’s support for the 2009 legislation on termination payments in the face of widespread fears it would drive up pay.

“Some reacted like the sky had fallen in, saying that executives would decamp to the USA, but none of that has happened,” he said.

However, Hagart said there was still much work to be done in gaining greater diversity among non-executive directors, only 18 per cent of which are women.

He blamed board for a “lack of creativity and leadership” on this issue. “If you speak to boards about this they will say there is often no good senior execs who are female,” he said.

Other figures from the annual survey show that the average total statutory pay for ASX200 chief executives is $4.84 million, a multiple of 63 times average earnings – a figure at its lowest level in a decade and 33 per cent below the 2007 peak of 94 times average earnings.

The median bonus for those CEOs who received a bonus fell 10.4 percent to $950,000. These are the lowest levels recorded in ACSI’s study for a decade. The proportion of CEOs receiving a bonus rose however, from 82% to 87%.

Bonus deferral among the ASX100 sample rose, with 44% of the CEOs having a proportion of their bonus deferred, up from 33%. This continues a trend where a greater number of companies are deferring bonuses, rather than paying all short term incentives in cash.

 

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