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Executive salaries under the microscope

Several organisations, including some large ASX listed businesses, have already announced executive pay cuts to manage the impact of the pandemic, a research project by global professional services firm Aon has revealed.

Executive salaries in the travel and tourism, entertainment and hospitality, and mining and resources industries have been severely hit with other industries impacted to varying degrees.

Aon’s research into 226 ASX listed companies at the end of May shows 87% have announced to reduce board, chair and NED fees, by an average of 51%. And 72% have announced to reduce CEO remuneration, by an average of 37%.

Short-term market volatility is expected to also be reflected in incentive payouts and several organisations may not provide any payouts at all due to the hit on company financials and market performance. Some boards may however consider discretionary payouts to balance executive interests with company performance.

Key trends before COVID-19 struck

Before COVID-19 struck, the key trends in executive remuneration showed an increased focus on pay-for-performance.

There was also growing discussion on the use of non-financial metrics in LTI plans and a general push for higher levels of transparency in remuneration disclosures around performance targets and incentive payouts.

There was an increased investor push for alignment of executive pay with ESG goals. Some organisations had made a move towards ‘simplifying’ remuneration structures by combining traditionally separate STI and LTI plans in to a common ‘hybrid’ plan. However, most of these plans were met with some level of shareholder/ investor resistance and the number of ‘remuneration strikes’ organisations have received in their AGMs has increased in the last two voting seasons.

Where to next for executive remuneration?

Aon and Governance Institute will release the results of the Remuneration Survey 2020 on 1 July 2020 to members, providing key insights on executive salary trends.

The findings will inform a Governance Institute webinar on board discretion in determining executive pay outcomes to be held on 3 July.

The webinar featuring Laura Wanlass, Partner & Global Head Corporate Governance, Aon and Daniel J Smith, General Manager APAC, CGI Glass Lewis will look at the top considerations for boards this year in respect to deciding remuneration. Megan Motto, Chief Executive Officer, Governance Institute of Australia will chair the panel.

Register for the free webinar

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