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The $23.87m man!!!REALISED PAY IN 2018
• But only $2.1m base pay
• Share price doubled over 3 years
• Top quartile of ASX100
• Top quartile of global airline peers
• Now working for zero salary
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The $37.7m man!!!REALISED PAY IN 2019
• Andrew Barkla, CEO of IDP
Education
• IDP Education is an
international education
organisation offering student
placement in Australia, New
Zealand, the USA, UK,
Ireland and Canada. IDP has
more offices in 31 countries
Efficient Contracting
4
Managerial Power
Two Views of Executive Compensation
• Competitive labour market
• Directors optimise firm value
• Highly talented individuals
• Greedy managers
• Enabled by
directors
• Not transparent
CEO Compensation as at Grant Date
Source: Murphy (2012) 5
S&P500 FIRMS
As at 2018, around 50%
of CEO compensation
comes from restricted
stock.
Source: Murphy (2012) 6
Growth from 1978 to 2018IN THE UNITED STATES
Controversy 1:
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RELATIVITIES WITH OTHER WORKERS
• Tournaments are effective for
motivation
• Why should ‘Rockstar’ CEO’s earn
less than sport and entertainment
heroes?
• Public outrage about ‘fairness’?
• Can CEO identify with employees
and vice versa if earning 300x
more?
8
Rising share market lifts all boats
Bonuses have become an entitlement,
not truly ‘at risk’
‘The 10 minutes that shamed the
board’ – CBA case
Current CBA Chair Catherine
Livingstone had to defend the
indefensible bonuses in FY 2016
Controversy 2:PAY WITHOUT PERFORMANCE
Some promising signs:
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PAY WITHOUT PERFORMANCE
Financial
Year Ended
2019
Financial Year
Ended 2018
Median bonus awarded to CEO’s in the ASX100, as a
proportion of maximum
60% 70%
Number of CEO’s in the ASX100 with zero bonus 12 1
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Executives can produce apparent profits in the
short-term through fraud, misconduct and hidden
risk. Consequences are seen in the long-term.
Controversy 3:FRAUD, HIDDEN RISKS AND SHORT-TERMISM
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Controversy 3:HIDDEN RISKS
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Controversy 3:HIDDEN RISKS
Incentivising for the long term?
More share-based remuneration
and deferred cash, longer vesting
periods
Subject to malus/clawback
Potentially vesting 2 years after
the executive’s last day of office
Don’t get angry…
If you are offended by executive
remuneration write to your super
fund!!
Q & A
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