Pandemic forces CEO pay cuts as annual bonuses drop 24pc

Chief executives took a sizeable pay cut this year amid the coronavirus pandemic which has slashed the pay of their workforces, with leading bosses such as Macquarie's Shemara Wikramanayake, Transurban's Scott Charlton and Qantas' Alan Joyce among those to take the biggest hit.

CSL chief executive Paul Perreault topped the list of highest paid CEOs. Mr Perreault received $16.17 million in reported pay and a take-home pay packet of more than $28.22 million, after the biotechnology giant’s share price rose more than 33 per cent last financial year and emerged as one of the big winners from the pandemic.

The Australian Financial Review‘s annual CEO pay survey, prepared by data company OpenDirector, showed the top 50 CEOs earned $5.02 million on average this year, a decline of 3.1 per cent, as annual bonuses fell by 24 per cent although long-term incentives increased by 4.9 per cent.

NAB’s Ross McEwan was among the last of the top CEOs to report his pay on Wednesday but did not make the top 50 highest paid CEOs making $2.42 million, after Mr McEwan took a 20 per cent cut in the second half after NAB’s full-year cash profit fell 37 per cent.

“Our shareholders are hurting and we need to share that pain,” Mr McEwan said last week delivering the profit drop with none of the big four bank CEOs making the top ten paid CEOs.

ANZ’s Shayne Elliott took a $550,000 pay cut but managed to rank as the highest paid of the bank CEOs on $7.25 million. He still fell just short of the top 10, as did CBA’s Matt Comyn, despite his pay rising to $5.68 million.

Westpac’s Peter King received $3.56 million while former CEO Brian Hartzer left the bank with less than $500,000 and no golden handshake with $21.51 million in lapsed long-term rights left on the table.

Ms Wikramanayake – knocked off as the country’s top paid CEO after becoming the first woman to top the ranks last year – ranked second behind Mr Perreault with $14.9 million and a take-home package of $18.15 million. However, she suffered the largest cut this year with her reported pay falling by more than $3.13 million.

Debate continues among investors over whether reported or take-home pay is a better measure of remuneration. Reported pay is required to be disclosed under accounting standards, but take-home pay reflects the value of shares granted in prior years which have vested.

The chief executive of struggling wealth giant AMP, Francesco De Ferrari, ranked third with $13.43 million in reported pay for the 2019 calendar year, which triggered a 67 per cent protest vote by investors at May’s annual shareholder meeting.

CEO of property group Goodman Group, Greg Goodman, was the fourth of just five CEOs of Australian companies to receive more than $10 million this year with $11.99 million in reported pay and was only marginally behind Mr Perreault’s take-home pay packet, after receiving $26.8 million. Experts said most investors would struggle to take issue with Mr Perreault’s pay.

“CSL is now Australia’s largest company by market capitalisation at $138 billion and the group has demonstrated excellent growth through 2020 from a share price of $242 a year ago to over $300,” managing partner of executive search firm Johnson Partners, Jason Johnson said.

“CSL is a remarkable success story on the global stage made even more impressive by the fact the group is now a leader in developing a pipeline of potential COVID-19 vaccines.”

Rio Tinto’s recently resigned CEO Jean-Sebastien Jacques also received $10.3 million in reported pay for the 2019 calendar year, despite being denied bonuses this year worth close to $5 million after the destruction of caves at Juukan Gorge in Western Australia.

Annual bonuses hit

BHP’s Mike Henry received $8.78 million last financial year, despite only acting as CEO since January. Newcrest’s Sandeep Biswaas, Wesfarmers’ Rob Scott, Woodside Petroleum’s Peter Coleman and Ansell’s Magnus Nicolin rounded out the top ten.

South32’s Graham Kerr, ANZ’s Elliott, Woolworths’ Brad Banducci, Fortescue’s Liz Gaines, Brambles’ Graham Chipchase, Commonwealth Bank’s Comyn, Origin Energy’s Frank Calabria and Telstra’s Andy Penn are among the next highest paid CEOs.

Annual bonuses were hit hard by the pandemic, declining from $1.14 million last year to $864,000, a drop of $276,000 or 24 per cent.

However, long-term bonuses increased from $2.24 million last year to $2.34 million, a rise of $110,000 or 4.9 per cent.

Eight AGM ‘strikes’

The CEO pay outcome comes amid a fairly benign AGM season on pay issues – there have been eight “strikes” being a protest vote of 25 per cent or more – among top 200 companies so far according to the Australian Shareholders’ Association, including AGL and Star Entertainment with CBA also suffering a 21 per cent protest vote.

Computershare also faced a narrow miss with a 24.39 per cent protest vote on Wednesday.

However there have been major shake-ups at CrownMyer and AMP amid broader performance and reputational issues. A further eight top companies which remain on a first strike will face investors in the coming weeks including Westpac, Harvey Norman, SEEK, Ramsay Healthcare and Sonic Healthcare on Thursday.

There is also an increased focus on CEO and executive expenses this year in the wake of the resignation of Australia Post CEO Christine Holgate and the resignation of ASIC deputy chairman Daniel Crennan with ASIC chairman James Shipton standing down pending an inquiry.

Other notable CEOs who had a significant drop in remuneration included Woodside’s Mr Coleman, Darren Steinberg from Dexus, Colin Goldschmidt from Sonic Healthcare, Mr Banducci at Woolworths, Stuart Irving at Computershare and Steve McCann at Lendlease.

Qantas’ Mr Joyce reported pay fell from $6.57 million to $4.76 million, a $1.8 million pay cut. His take home pay fell significantly from almost $10 million to $1.74 million, a long way from the almost $24 million he took home in 2018.

Mr Charlton’s reported pay fell from $7.17 million to $4.55 million – a $2.62 million cut. While Macquarie’s Ms Wikramanayake led this year’s pay cuts Mr Johnson expected that to rebound next year based on the investment bank’s turnaround since the start of the pandemic.

“Ms Wikramanayake $14 million remuneration is down by over $3 million which was the largest dollar value decline of any of the ASX100 CEOs,” Mr Johnson said.

“But on current performance of Macquarie there is a strong probability Shemara’s remuneration will rebound next year to reflect the tremendous turnaround of the business since the onset of the pandemic.”

However other CEOs saw their pay rise, despite a poor performance because of the pandemic.

Founder of Open Director Donald Hellyer pointed to the CEOs of South32, Star Entertainment, Origin Energy and BlueScope where share prices were down last financial year but CEO pay rose.

“Some of the remuneration outcomes appear baffling with some CEOs actually earning more in 2020 than 2019, despite the respective company’s performance being impacted by the pandemic,” Mr Johnson said.

South32’s made a $65 million loss and its shares fell 36 per cent but CEO pay increased by 5 per cent.

Star Entertainment made a $95 million loss as its shares lost 31 per cent but the CEO’s statutory pay was also up.

“It should be remembered that statutory remuneration does amortise long-term compensation,” Mr Johnson said. “There is not always a clear correlation between current business performance and remuneration which typically reflects the past three to five years.”

“It should be remembered that statutory remuneration does amortise long-term compensation," Mr Johnson said. "There is not always a clear correlation between current business performance and remuneration which typically reflects the past three to five years.”

Qantas’ Mr Joyce reported pay fell from $6.57 million to $4.76 million, a $1.8 million pay cut. His take home pay fell significantly from almost $10 million to $1.74 million, a long way from the almost $24 million he took home in 2018.

Mr Charlton’s reported pay fell from $7.17 million to $4.55 million – a $2.62 million cut. While Macquarie’s Ms Wikramanayake led this year’s pay cuts Mr Johnson expected that to rebound next year based on the investment bank’s turnaround since the start of the pandemic.

“Ms Wikramanayake $14 million remuneration is down by over $3 million which was the largest dollar value decline of any of the ASX100 CEOs,” Mr Johnson said.

“But on current performance of Macquarie there is a strong probability Shemara’s remuneration will rebound next year to reflect the tremendous turnaround of the business since the onset of the pandemic.”

However other CEOs saw their pay rise, despite a poor performance because of the pandemic.

Founder of Open Director Donald Hellyer pointed to the CEOs of South32, Star Entertainment, Origin Energy and BlueScope where share prices were down last financial year but CEO pay rose.

“Some of the remuneration outcomes appear baffling with some CEOs actually earning more in 2020 than 2019, despite the respective company’s performance being impacted by the pandemic,” Mr Johnson said.

South32’s made a $65 million loss and its shares fell 36 per cent but CEO pay increased by 5 per cent.

Star Entertainment made a $95 million loss as its shares lost 31 per cent but the CEO’s statutory pay was also up.

“It should be remembered that statutory remuneration does amortise long-term compensation,” Mr Johnson said. “There is not always a clear correlation between current business performance and remuneration which typically reflects the past three to five years.”

The figures are based on total statutory pay required to be disclosed in annual reports, which includes the accounting value of shares and options spread over the vesting period.

Some major investors such as the Australian Council of Super Investors prefer to focus on take-home pay which takes account of the value of shares and options which actually vested in the past financial year.

The challenge is take-home pay is sometimes not disclosed and the pay outcomes typically lag company performance by years.

 

Article retrieved from https://www.afr.com/policy/economy/pandemic-forces-ceo-pay-cuts-as-annual-bonuses-drop-24pc-20201020-p566sd. Article by Patrick Durkin – Patrick Durkin is Melbourne bureau chief and BOSS deputy editor. He writes on news, business and leadership. Connect with Patrick on Twitter. Email Patrick at [email protected]


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