The Australian Council of Super Investors (ACSI) has released its annual research paper titled "CEO Pay in the Top 200 Companies" for 2012. The study was commissioned by ACSI and prepared by Ownership Matters and makes for interesting reading.
The averages
- In 2012, the average fixed pay of a top 100 CEO fell 2.4% to $1.9 million.
- In 2012, the average bonus paid to top 100 CEOs increased by 4.8% to $1.315 million with 82% of CEOs receiving a bonus.
- Cash pay remained high in 2012. Of the total fixed and bonus pay, the average cash payment received by a top 100 CEO was close to $3 million.
The winners
- Brothers Peter Lowy and Steven Lowy, co-CEOs of Westfield Group (ASX: WDC), were grouped together as one for the study. Together they received statutory pay of $21 million.
- Coming through in second place was ANZ Bank (ASX: ANZ) CEO Mike Smith with $9.7 million in statutory pay.
- Next up was Gail Kelly who received $9.6 million in statutory pay as CEO of Westpac Bank (ASX: WBC).
- In fourth spot was now-retired CEO of global mining giant BHP Billiton (ASX: BHP) Marius Kloppers, who received statutory pay of $9.5 million.
- Rounding out the top five highest paid CEOs was Louis Gries from James Hardie Industries (ASX: JHX), who received statutory pay of $9 million.
While most employees can only dream of earning these kinds of salaries, there was at least some degree of conservatism in 2012. The study did find that "average CEO fixed pay in Top 100 companies fell for only the second time in eleven years. Increased investor engagement combined with the introduction of the 'two strikes' rule have no doubt played their part in these results."
Foolish takeaway
While having CEO pay out in the open provides clarity and insight for investors, it is also partially responsible for CEO pay being set in relation to a peer group. This unfortunately has led to a march upwards in CEO pay as salaries shuffle towards the highest paid.
One of the most disturbing finding from the study was that "a large component of statutory pay is paid irrespective of performance." While the seemingly enormous level of pay in itself is alarming for many shareholders, the possibility that a large portion is not even linked to performance or to the creation of shareholder value is even more alarming and reinforces why investors should pay close attention to the managers running their companies.
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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.
