The latest annual Board & Executive Remuneration Report released by Aon and Governance Institute of Australia surveyed 528 organisations, including 293 listed companies from the ASX300, and also draws upon annual report data.
After last year’s COVID-induced hit to the hip pocket it seems some optimism is emerging with 58% of the participating organisations saying they expect pay rates for directors and executives/ senior managers to increase this year.
When examining the organisations that participated in the survey in 2022 and 2021, the average annual increase to senior executives’ pay ranged between 1.7% (fixed remuneration) and 3.2% (total remuneration). CEO fixed pay climbed by just 1.1% on average. For board members, there was a 8.8% increase and for chairs, a 10.7% increase.
Governance Institute of Australia CEO Megan Motto said the executive pay market seems to be in a state of subdued catch up after a sluggish year in 2021.
“Last year there were very few meaningful salary increases and it’s clear that low wage growth remains,” Ms Motto said. “But with almost 60% of the organisations expecting to boost executive pay in the next 12 months, it seems some optimism is returning.
“And as the war for talent continues, there may be some further pressure on salaries. Getting the right person for these top jobs in critical and remuneration is a key factor for candidates.”
Aon’s Head of Executive Compensation Zoe Lockyer said the report provides an important snapshot of remuneration trends which in turn reflects the complex prevailing market sentiment, driven by uncertainty and increasing volatility in many areas.
“Currently we are seeing multiple domestic interest rate increases, skill shortages, supply chain issues, global political instability, low immigration and ongoing disruptions from COVID-19 having an impact on the focus in boardrooms on remuneration,” Ms Lockyer said.
“Organisations are finding they must balance these external pressures with sustaining a committed, high performing and well-remunerated workforce. While the great resignation hasn’t played out as predicted, building a resilient workforce and rewarding employees includes a strong remuneration program.”
In line with society’s shifting attitudes, ESG factors are increasingly coming to the fore when salaries are being set with the report finding that 74% of organisations consider shareholder and community expectations when deciding pay for company heads.
Female representation on boards was also examined with 27% of the NFPs reporting that more than 50% of their directors are female, compared to 18% of the organisations from the broader market.
The report also examined board composition, the number of meetings held, remuneration for the various types of board committees and the likely future challenges.
Digital transformation, cyber security, changing regulatory environment and changes to work/organisational practices were rated as the top challenges for boards
All Governance Institute members can download a complimentary abridged version of the report here.
The full report is available for purchase for $3,500 + GST for Governance Institute members, or $5,000 + GST for non-members.