Inflation and sluggish wage growth has barely affected pay for many of WA's top executives.
When most Australians check their bank accounts at the end of every fortnight the number they see will, in real terms, represent less than it did a year ago. Inflation is a big part of the problem.
Prices jumped nationally by a staggering 6.1 per cent in the 12 months to June, the biggest increase in a decade and chalked up largely to increased housing costs, including for furniture and groceries.
None of this would prove an issue if wages were keeping pace with prices, but they aren’t.
As of writing, wages grew at just 2.6 per cent in FY22, which equates to a cut of 3.5 per cent in real terms in the most recent financial year.
That means purchasing power has degraded across the economy.
Predicting an end to the wage-inflation decoupling is difficult because, as of the 12 months to September, the gap grew even wider, with real wages cut in that time by a further 4.2 per cent.
Federal budget papers don’t anticipate there’ll be a fix until the 2024 financial year.
Even then, real wages growth will be just 0.5 per cent following a cut of 2.5 per cent this financial year.
It’s a different story when turning to the top of the table, where executives, burnished by generous performance-tested remuneration packages, have largely defied the backslide amid a bumper profit year for company profits, which, in FY22, grew by 7.6 per cent in seasonally adjusted terms.
Look no further than Raleigh Finlayson, who barely warranted a mention the last time Business News surveyed executive remuneration.
Then, Mr Finlayson had just left Saracen Minerals following its $16 billion merger with Northern Star Resources (with which it co-owned the Super Pit) and joined Genesis Minerals where, per FY21 reporting, the bulk of his remuneration was set to come from a combination of options and performance rights.
He’s hit paydirt in this year’s survey as his base salary of $120,000 was bolstered by $24 million earned courtesy of a revaluation of 25 million options he holds, to be vested in two tranches.
That means he was by some considerable distance Western Australia’s best-paid executive in FY22.
To be clear, this figure is a measure of Mr Finlayson’s statutory pay.
Some ASX-listed outfits provide supplementary data on actual pay, however, as Genesis is not one of them, it is unclear exactly how much money Mr Finlayson actually earned in FY21.
Still, with 99.4 per cent of his pay derived from equity, a revaluation of his options was why he jumped up this year’s list.
That speaks to a broad gulf between base salaries and who has historically tended to top these surveys.
Proportionally speaking, just 17.6 per cent of what the survey’s top 10 earned was derived from a base salary, while a staggering 66.4 per cent was earned via performance-based avenues.
Indeed, if this exercise merely assessed annual salaries, Wesfarmers managing director Rob Scott would come out on top with $2.26 million per annum, closely followed by APM Human Services International boss Michael Anghie, who landed in ninth place when accounting for full pay packages.
Mr Scott took out the gong for highest-paid senior executive last year with a remuneration package totalling $6.93 million, aided in part by $5.19 million worth of equity payments.
Equity-based payments again strengthened his position this year, with a bump in his base salary along with a modest jump in the fair value for his shareholdings boosting his overall income to $7.95 million, amounting to a 13 per cent year-on-year increase in earnings.
To put that into perspective, though, it took Mr Finlayson just four months to earn the same sum.
There are plenty of examples where share-based payments have produced significant bolters, including Vlado Bosanac, a name that has otherwise eluded these surveys in the past.
Performance-related payments as a proportion of total remuneration totalled 96.1 per cent for Mr Bosanac prior to his resigning as Advanced Human Imaging’s executive chair in February to take on the lesser role of strategy and revenue lead.
His base salary was just $200,000 in FY21, with $6.39 million earned as share-based payments.
Latest reporting shows Mr Bosanac’s significant stake in the business represents a large sum of his overall remuneration this year after he exercised 2 million performance rights.
He still holds 10 million rights he’s yet to vest, along with 7.4 million ordinary shares.
Arizona Lithium managing director Paul Lloyd was the other most significant addition to this year’s list based on increased share-based payments, earning $3.6 million in FY22.
His base salary barely increased, from $270,000 per annum to $300,000, with a $3.25 million jump in performance-tested income rocketing him up this year’s survey.
In percentage terms, that means 92 per cent of his remuneration was performance tested in FY22 compared to just 14 per cent the year before.
Some figures, such as those relating to recently departed Fortescue Metals Group chief Elizabeth Gaines, were boosted thanks to large standalone cash payments.
Ms Gaines’ remuneration increased by 26 per cent in FY22, from $4.86 million to $6.61 million, in large part thanks to a one-off $1 million discretionary payment made in recognition of the company’s bumper performance under her watch in FY21.
Julie Shuttleworth, who earned $2.99 million leading spinout Fortescue Future Industries, took home a lesser but still considerable bonus of $515,000 for her efforts.
And though Ms Gaines earned a further $970,000 worth of short-term benefits linked to Fortescue’s executive incentives plan, that figure could have been higher, with the company’s annual report noting the death of a mineworker in September 2021 had meant payments linked to safety outcomes were forfeited.
It’s unclear how much that event cost her specifically but her contract in nominal terms was worth $7.54 million in FY22.
Ms Gaines now sits on Fortescue’s board and is employed as a global ambassador at FFI. Not all top finishers were aided by performance payments, however.
BHP chief operating officer Edgar Basto, for instance, accrued one of the most diverse pay packages of any executive in the top 10, with his $4.41 million remuneration almost evenly divided between a base salary, bonus, shares and options, and a larger-than-average superannuation contribution.
Peter Coleman, who officially resigned as Woodside Energy’s managing director midway through 2021, was a similar story, landing in second place with $12.2 million earned in 2021.
His pay grew by 40 per cent year-on-year, thanks largely to a $US2.48 million termination benefit that lowered his performance-tested pay from 67 per cent in 2020 to just 58 per cent.
When normalising for that one-off sum, Mr Coleman’s compensation grew by a slightly more modest 15 per cent. It’s worth noting not all shareholders approve of these remuneration packages.
Some, such as the one received by Mr Scott, obtained overwhelming support from shareholders, with Wesfarmers’ remuneration report adopted with 96 per cent support. Others weren’t so lucky.
Ian Testrow, who has regularly appeared in this survey’s top 10 in recent years, fell to 15th place this year just $3.47 million earned in FY22, with a drop in the proportion of his performance-tested remuneration, from 80 per cent to 69 per cent, to blame.
More than a fifth of shareholders voted against adopting the company’s remuneration report amid broader opposition to Mr Testrow’s remuneration, including issuing a loan and further share rights to him.
Directors
While Business News’ executive salary corrects for board members, some, if included, would have landed near the top of the list.
They include DEVELOP Global chair Michael McMullen, whose annual fee is just $60,000.
However, the realisation of options stacked onto his earnings means that, if placed, he would’ve polled just outside the survey’s top 10 with $4.1 million, above the likes of Mineral Resources chief Chris Ellison, who made $3.65 million.
Another notable omission is Qantas and Woodside chair Richard Goyder, who holds various positions outside of his positions on those ASX-listed boards, including with the AFL.
While his charitable work is unlikely to incur monetary recompense, Mr Goyder’s AFL gig would likely pay a decent sum, given at present he is leading a search for a new chief executive and has recently helped steward a $4.5 billion TV rights deal for the league.
Mr Goyder earned $780,000 in 2021 for chairing Woodside and $668,000 in FY22 for chairing Qantas.
