29/10/2008 - 22:00

CEO salaries outstrip average

29/10/2008 - 22:00

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TOP executive salaries in Australia's 100 largest listed companies increased three times the average adult wage from 2001 to 2007 and more than five times greater than the consumer price index, according to a recent national survey.

TOP executive salaries in Australia's 100 largest listed companies increased three times the average adult wage from 2001 to 2007 and more than five times greater than the consumer price index, according to a recent national survey.

CEO pay packets rose by 96.4 per cent during the period, or 11.9 per cent a year compound.

By comparison, average weekly earnings rose by 32.3 per cent while the CPI rose by 17.7 per cent.

The survey, carried out by the Australian Council of Super Investors Inc., analysed 69 companies in 2007.

Average total pay for the 69 CEOs included in the survey was $5.53 million, up from $4.56 million in 2006 and $3.77 million in 2005.

Median CEO pay also increased substantially from $3.09 million in 2005 to $4.17 million.

The survey found that few companies provided shareholders with explanations of fixed pay increases beyond generic disclosures stating fixed pay was reviewed annually against movements in pay at other companies of a similar size.

ACSI believes companies should clearly disclose the reason behind significant increases in base salaries as these and other aspects of fixed remuneration are not explicitly tied to company performance.

Most of the top 100 companies surveyed have a short-term incentive plan for senior executives designed to reward them for performance across a single financial year. 88.4 per cent of CEOs received this in 2007.

The percentage of CEOs receiving an annual bonus in 2007 dropped from 94.6 per cent to 88.4 per cent.

However, aggregate bonuses paid to 60 CEOs who received an STI rose from $54.2 million in 2002 to $132.87 million for the 61 executives who received it in 2007.

The survey also found that the amount of shareholder money paid as annual bonuses to CEOs in the top 100 companies more than doubled over five years and the proportion of CEOs receiving a bonus rose by 14.9 per cent.

In assessing annual bonuses, most companies only provided general comments about the measures used, despite the Corporations Act requiring them to provide a detailed summary.

ASCI believes that as annual bonuses are paid in cash, they should be linked to key performance requirements and targets; where commercial confidentially applies to performance objectives and targets, shareholders should be informed of the parameters adopted for bonus arrangements.

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