The $23.87m man!!! - mq.edu.au

2

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

3

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:

7

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:

9

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

10

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

11

Controversy 3:HIDDEN RISKS

12

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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