Report to analyse remuneration

28/02/2018 - 09:31

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A new report will allow executives and directors to compare remuneration with peer companies of similar size or in the same industry.

Allan Feinberg expects executive remuneration to increase as the economy picks up. Photo: Attila Csaszar

A new report will allow executives and directors to compare remuneration with peer companies of similar size or in the same industry.

The report, to be launched next month, captures data from 1,400 listed companies.

“This is the only report in Australia that surveys comprehensively the whole ASX market,” BDO Remuneration and Reward managing director Allan Feinberg said.

The 1,400 companies have been broken into five tiers based on market capitalisation, starting at zero to $25 million and topping at $3 billion-plus.

This has been further broken down by state and by 10 industry sectors.

The report highlights the close correlation between company size and remuneration (see table).

For instance, the median fixed annual remuneration of chief executives at tier four mining companies (with a market cap between $25 million and $125 million) is $276,000.

For tier three mining companies (with a market cap between $125 million and $600 million), the median jumps to $448,000.

The survey encompasses more than 11,000 individual roles across 15 positions.

This includes chairman, chief executive and chief financial officer roles, along with key legal, company secretarial, human resources, sales and marketing, and business development roles, among others.

While some remuneration reports simply populate data and compute market quartiles, the BDO report also contains analysis to inform remuneration strategy.

“In addition to providing granular data, we have developed multiple salary matrix tables based on annual revenue and market capitalisation, which can be utilised to determine fix pay rates across multiple roles and sectors,” Mr Feinberg said.

“It’s a first.”

He said his analysis included the inter-quartile range, or the difference between the 25th and 75th percentile, for each category.

“This is rarely presented in reports but is an important statistic for remuneration purposes,” Mr Feinberg said.

“If the spread of data is very high or very low, it can mean that the median is not a stable enough point to target.

“Some companies are not aware of this and use the median regardless, which means that the board can get misleading information.”

BDO’s analysis also looked at the ratio of pay between chief executives and other executives.

Mr Feinberg said this analysis could identify deficiencies in structure beyond remuneration, such as whether the company was relying too heavily on an individual, and issues of succession planning, retention and internal equity. 

BDO principal Diana Forsyth said that, as the ratio of chief executive pay to other employee pay gained more prominence in investor circles and internationally, this could be an important matter for boards to consider.

Looking ahead, it was projected that increased investor demand for growth stocks with higher returns would lift demand for high performing executive talent and possibly lead to more aggressive rates of pay.

“As competition for executive talent increases, it is essential that boards approach remuneration in a considered way that aligns shareholder and executive interests as part of a wider employment brand,” Mrs Forsyth said.

The full report will be launched on March 9 and will be available for purchase from that date.

A supplementary report with selected findings can be downloaded from the Business News website at no cost.

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