The study, by Melbourne University's Centre for Corporate Governance and Regulation, found only 24% of Australian CEOs had comparable remuneration to their international peers.

By Daniel Herborn

Posted on August 23, 2018

The study was careful to say the conclusions should not be read as proving Australian CEOs are “good value” or “underpaid”.

Instead, the opposite may be true; international CEOs may be being paid too much. Further, Australian companies may not be in direct competition with international firms for CEOs.

CEO pay has increasingly become a point of political contention in Australia. Embattled Prime Minister Malcolm Turnbull has previously said Australia has fallen into a “cult” of excessive executive remuneration and that CEO salaries are now out of line with shareholder and community expectations.

Labor’s Wayne Swan, a former Deputy Prime Minister of Australia, has also attacked CEO salaries, saying fat cat executives have been “gorging themselves” on excessive pay. He has also advocated a cap on CEO salaries.

Swan responded to an Australian Financial Review report on the study by saying the paper “eggs on our CEOs to push for salaries higher than were achieved at the height of the Global Financial Crisis.”

What the study found about Australian CEO salaries

The study covered the 200 largest Australian companies, almost all of which are listed on the Australian Stock Exchange (ASX) 200 Index. It then looked at the market capitalisation of each firm to find comparable firms internationally. The study drew on 2017 fiscal data and compensation number from each firm’s remuneration reports.

Australian CEOs in the healthcare sector (35%), oil and gas (45%), insurance (49%) media (52%) and banking (59%) earn the lowest relative to their global peers.

Colin Goldschmidt, CEO of Sonic Healthcare, earned A$5.84 million, compared to A$14.6 million with firms of similar-sized firms internationally despite achieving better operating and stock performance last year. Robert Cooke of Healthscope earned A$2.56 million, well under the benchmark figure in the study of A$10.1 million.

“Surprisingly, metals and mining companies also exhibit sub-benchmark remuneration [0.92], despite Australian firms representing some of the largest mining firms in the world,” the study says.

One industry bucking the trend is mining, which the study suggests pays more generous remuneration than its international counterparts. The authors suggest that an explanation for this is that Australia needs to pay higher salaries to attract talented managers from a relatively small pool of those with specialist expertise.

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