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CEO Pay for Performance

With the new year off to a rapid start, PayIQ Executive Pay offers the following perspectives to ponder:

  1. Analysis of executive pay disclosures should always focus on maximum pay opportunity.

  2. Interpreting what ‘target’ pay is and how challenging this is to achieve requires careful consideration and interpretation of the underlying performance assessment framework.

  3. Whether the quantum of executive pay is appropriate can only be assessed having regard to the relevant executive talent market, individual position complexity and what performance or contribution is being incentivised.

  4. Realised or take-home pay is an output or outcome from the above and should be an input into improving future target setting. The limitations of comparing realised pay alone should be acknowledged.

  5. Actual performance achieved or contributed provides a good insight on executive pay for performance (the ‘value’ or ‘bang-for-buck’ perspective).

  6. Having a well-designed pay for performance framework is critical to drive shareholder value over the longer term. Focusing on realised or take-home pay alone cannot provide a meaningful perspective on executive contribution/value.


PayIQ Executive Pay has examined recent FY2024 disclosures of Short Term Incentive (STI) award outcomes for CEO’s across S&P/ASX 100 companies to identify where shareholders are capturing most value from their executive STI programs. This has allowed PayIQ to identify the companies and sectors with STI programs best aligned with shareholder interests.


PayIQ conducted this research analysing companies that have disclosed their FY2024 CEO remuneration data and assessed the companies according to the following criteria:

  • A ranking of the S&P/ASX 100 companies based on their 12-month Total Shareholder Return (TSR) performance (to 30 November 2024).

  • A ranking of the S&P/ASX 100 companies by their CEO’s Actual FY24 STI achievement as a percentage of Total Fixed Remuneration.


The quadrants of the graph identified below represent the 4 broad and preliminary interpretations/action points from the resulting pay-for-performance analysis.



Top Performing companies

The above analysis highlighted 4 companies where high STI awards were aligned with market leading TSR performance over the same period, clearly aligning executive pay and organisational performance.

  • Technology One Limited (ASX:TNE)

  • JB Hi-Fi Limited (ASX:JBH)

  • Xero Ltd (ASX:XRO)

  • ResMed Inc. (ASX:RMD)


Top Performing sectors

Three sectors were highlighted in the data as generally offering better value for money from their STI programs, the TSR rank of constituent companies consistently outperforming the CEO’s STI award ranking over the same period:

  • Information Technology

  • Financials

  • Health Care

 
 
 

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