Deep in the money

 

UniSuper investment chief John Pearce is the highest-paid executive among Australia’s industry superannuation funds and one of 10 people to take home a pay packet of more than $1 million.

Pearce was handed $1.73 million for the year to June 30, a 9 per cent increase on 2018. His package included a base salary of $589,744 with a short-term bonus of $1.02 million, according to Investment Magazine’s 2020 pay survey, which has compiled the data from publicly available annual reports.

Now in its sixth year, the survey includes remuneration for non-profit licensed super funds for the financial year ended June 30, 2019. It also includes the country’s largest government funds and the Future Fund, but does not include bank-owned or other for-profit super funds.

This year’s survey comes just as the prudential regulator plans to introduce pay reforms across the financial services sector in 2021, which revamp bonus structures and defer the bulk of all payouts for up to seven years to ensure that staff do not profit from risky short-term investments.

The chief people officer at UniSuper, Julie Watkins, said it had become clear since the Hayne royal commission that taking a longer-term view on performance measures was required and that if not already built into a remuneration package, a long-term pay incentive could be beneficial.

“We are aware that a deferral period and clawback is likely to apply to some roles,” she said. “We expect to see further governance around incentives, deferrals, financial and non-financial metrics in performance plans. Whether this leads to higher or lower incentives is yet to be determined.”

Watkins confirmed that the $85 billion fund uses Australian benchmark data to remunerate Pearce and said she was “confident” his compensation was appropriately competitive. The data was sourced from banking, funds management, superannuation and insurance.

“Our focus is on ensuring greater retirement outcomes for members and the CIO performance incentive is related to significant influence on fund performance and results,” she added.

UniSuper last year topped Chant West’s best performance list. The balanced fund, which has among the highest allocation to equities among its peers, returned 18.4 per cent in 2019 compared to 14.7 per cent for the industry.

Watkins said metrics in UniSuper’s performance plans also measured long-term investment returns between three to 10 years, which provided a broad view of performance outcomes.

Best paid CIOs & CEOs

The highest paid executives are typically investment chiefs, accounting for seven of the top 10 who earned more than $1 million, the survey showed. After UniSuper’s John Pearce, AustralianSuper’s Mark Delaney, the Future Fund’s Raphael Arndt and First State Super’s Damian Graham are the next three highest-paid CIOs. Delaney received a total remuneration package of $1.63 million while Arndt took home $1.46 million. Graham made fourth place, receiving $1.33 million followed by Commonwealth Superannuation Corporation’s (CSC) Alison Tarditi who was paid $1.27 million.

Other investment heads whose pay hit the $1 million mark included QSuper’s Brad Holzberger, now retired, and Sunsuper’s Ian Patrick.

Among the highest paid chief executives, the Future Fund’s David Neal – who is leaving the $212 billion sovereign wealth fund to join global money manager IFM Investors – topped the ranks earning just over $1.46 million. His short-term bonus was $770,759.

David Elia, CEO of the $45 billion Hostplus super fund, came in second. He received $1.19 million. AustralianSuper’s Ian Silk, CEO of the country’s largest super fund overseeing assets of $189 billion, came in third, receiving $1.06 million. UniSuper’s Kevin O’Sullivan was in 10th place with a total pay package of $849,320.

Incidentally, Elia is one of the few CEOs to earn more than their respective CIO; in this case, Elia’s investment chief Sam Sicilia was paid $967,624, putting him in eighth spot.

It’s relative

While the fat pay packets and lavish bonus plans of the private sector have come under fire in the wake of the royal commission, salaries in superannuation are generally lower. The public inquiry found that super funds were not as plagued with the problem of extravagant bonuses as the banks.

ANZ Bank boss Shayne Elliott, for example, was paid around $4.09 million, while National Australia Bank’s new chief, Ross McEwan, has a base salary of $2.5 million on top of bonuses. Commonwealth Bank’s Matt Comyn took home a $3.4 million package last year, lower than his predecessor Ian Narev who was paid an eye-watering $12.3 million. Former Westpac CEO Brian Hartzer earned $4.9 million.

This compares to the maximum payout for a CEO in our survey of $1.46 million and $1.73 million for a CIO.

“The salaries (at industry funds) are reasonably competitive,” said Korn Ferry’s Graeme Bricknell, head of global financial services Australasia at the executive search firm. “But there is a wider range from the top to the bottom, which is different to the major banks, because of the variance in the funds.”

He said future remuneration payouts would likely be affected by the ongoing consolidation in the superannuation industry that is already forecast to swell to swell to $4.8 trillion in assets by 2034. Around 10 to 12 large funds are expected emerge from the flurry of deal making, including a handful of mega funds with assets north of $500 billion.

“Given the complexity of the roles and size of the sector, salaries need to be at a level that not only attract good talent but retain it,” said Bricknell. “There are a few ex-bankers on the list and many have come out of the asset management industry.”

Base salaries vs bonuses

While UniSuper’s Pearce received the biggest bonus of any CIO of a large super fund with a $1.02 million payout, his base salary was $589,744. That’s lower than AustralianSuper’s Delaney who is on $740,800 and Arndt at the Future Fund who gets paid a base of $664,832.

In 2019, Delaney’s package included short-term incentives of nearly $861,525, while CSC’s Tarditi had a base salary of $593,753 and a short-term bonus of $605,097.

Michael Moses, a principal in Mercer’s remuneration consulting practice, said base salaries for superannuation fund executives would likely increase following new regulation and constrain short-term bonus payouts.

This year’s pay survey has again revealed that long-term incentives (see methodology for further explanation) were paid by just three funds including CBA Group and Mine Super. By comparison, 22 out of 55 chief executives and the same number of CIOs received short-term bonuses as part of their total payout.

First State’s Graham was the only investment chief of a major fund to receive a bonus linked to both long-term and short-term incentives (STI). Graham participates in a bonus scheme that includes both a cash and a deferred component. In the 2018/2019 financial year, he earned a base salary of $804,469 and was paid an STI of $262,021. In addition, he is entitled to a deferred bonus of $242,021, which will be paid in two years.

First State’s group executive of people and workplace environment, Steve Hill, said Graham’s total bonus was based on investment performance outcomes and individual performance measures.

“At First State, our remuneration and reward structures seek to have a direct connection to member outcomes,” Hill said. “One, three and five-year investment returns are core performance measures to drive a longer-term focus, with a 50 per cent weighting towards the latter.”

He added that deferred incentives helped with retention and aligned with First State’s “commitment to deliver sustainable long-term returns to members”.

Chairs

Topping the list of chairs was TWU Super’s David Galbally, who took home $284,400. Second place went to AustralianSuper’s Heather Ridout, who was paid $253,602, while First State’s Neil Cochrane received a total remuneration package of $210,087.

Data for Investment Magazine’s 2020 pay survey was compiled by Conexus Financial researcher, Poh Jenkinson.

Top 10 earners

The highest-paid CHAIRS

The highest-paid CHIEF EXECUTIVES

The highest-paid CHIEF INVESTMENT OFFICERS

Average C-SUITE EXECUTIVE PAY

Executives with highest STI


Methodology

Primary Target Data:
All values collected must be as stated in public reports
FY19 values for:

  • Base Salary
  • Super
  • Total REM<
    § If Total REM not reported, calculate total from other monetary elements
  • Notes
    § Any relevant footnotes, comments or considerations

Sources:
Published reports only
General exclusions/exceptions:

  • Accrued annual or long service not to be included
  • Non-monetary benefits
    If monetary value for benefit assigned in report and this contributes to the reported Total REM then include in dataset

The highest paid CIOs

Footnote: REM includes non-monetary benefits, other benefits or long-service leave.

The highest paid CEOs

Footnote: REM includes non-monetary benefits, other benefits or long-service leave.

The highest paid chairs

Footnote: REM includes non-monetary benefits, other benefits or long-service leave.

Full tables of who’s paid what:

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