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Analytics

INSIGHTS

PayIQ employ advanced data analytics capabilities to identify emerging trends in executive pay. This section presents our key findings and is regularly updated. Please get in touch if you have an area you wish us to explore further.

01 ESG OBJECTIVES AND COMBINED INCENTIVE PLANS

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ACHIEVE

ESG performance can be effectively incentivised within a combined incentive plan.

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REVIEW

Short term non-financial measures and targets can be reviewed and reset annually as required.

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ALIGN

Equity-based reward reinforces shareholder alignment over the longer term.

A sample timeline of ESG performance incorporated into a Combined Incentive Plan.

Sample timeline of ESG performance into combined incentive plan

ADDRESSING SOME   
CHALLENGES

  1. Meaningful progress is often achieved over the longer term.

  2. Shorter term performance objectives are required to incentivise longer term progress.

  3. Shorter term performance measures are often non-financial in nature.

  4. Setting of underlying performance targets needs to be reviewed regularly.

  5. Performance (shorter or longer term) is generally difficult to assess, reward and disclose transparently.

  6. Performance assessment can either be formulaic or qualitative/non-formulaic, team-based or individual-focussed.

02 COMPLEX STRUCTURE AND HIGH CEO PAY

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FIXED

​Larger company CEOs receive significantly higher fixed pay.

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OPPORTUNITY

Larger company CEOs enjoy higher variable pay opportunities.

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COMPLEX

​Larger companies tend to have more complex variable pay structures.

Fixed Pay, Variable Pay Opportunity & Total Pay are higher for the larger ASX organisations. 

Fixed Pay, Variable Pay Opportunity & Total Pay are higher for the larger ASX organisations.

COMPLEX VARIABLE PAY AND CEO COMPENSATION IN ASX100

CEOs of companies in the ASX100 are being granted significantly higher variable pay opportunities as a proportion of fixed pay. This is on top of their already significant fixed pay levels relative to their smaller peers in the ASX200 and ASX300.

 

An examination of the underlying variable pay arrangements for the ASX100 companies reveals significantly more complex structures and performance assessment frameworks.​

 

Variable pay structures of ASX100 companies are more likely to have complex STI scorecards, more non-financial performance measures, performance gateways and/or modifiers, multiple LTI vesting conditions and schedules, post-vesting restriction periods and a greater range of equity instruments.​

 

The increased complexity inevitably leads to CEOs discounting the value of their variable pay opportunity, particularly their LTI opportunity. Complex structures amongst peer organisations ultimately leads to a “ratcheting up” of variable pay levels and presents a more difficult pay-for-performance assessment for shareholders.

03 BETTER DIRECTORS INSTEAD OF MORE DIRECTORS

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FEES

Larger company Directors are not paid more fees for attending more Board meetings.

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MEETINGS

Larger companies do not hold more Board meetings than smaller companies.

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QUANTITY

Larger companies do have more directors on their Board

Directors are not paid significantly more at larger companies, they simply have more directors.  ESG performance incorporated into a Combined Incentive Plan.

ESG performance incorporated into a Combined Incentive Plan.

PAYING DIRECTORS: QUANTITY VS. QUALITY

Whilst larger companies pay more in director fees, our research reveals the fees are not paid by reference to the number of Board meetings directors have to attend. In fact, larger company Boards hold fewer Board meetings than their smaller counterparts but tend to pay for more directors. This results in a larger total sum paid to directors.

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What are shareholders actually paying directors for?

 

Whilst a larger Board seems to be a more expensive Board, is it a better Board?

 

How should shareholders pay their representatives?

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