Bonuses are back as Afterpay CEOs take home a record $264m

“After their lowest year on record, big bonuses have returned, but they haven’t just rebounded, they’ve hit new heights,” ACSI executive manager Ed John said.

“That’s why investors, and ACSI, will be scrutinising closely the results-reporting season to see if this concerning trend of bonus ‘catch-up’ continues. This year’s outcomes will be judged against a backdrop of difficult financial markets and an uncertain economic outlook.”

ACSI found that while the median bonus received by top 100 CEOs in 2020 was just 30 per cent of the potential maximum, it rose to a record-breaking 76.7 per cent in 2021 – the highest in the seven years of the data. The average bonus awarded to S&P/ASX 100 CEOs hit a record $2.31 million, exceeding 2017’s record of $2.3 million.

The return of CEO bonuses reflects the sharemarket which recorded its best financial year in 34 years last year – rising 24 per cent in the best performance since 1987.

However, the details of last year’s CEO pay packets will badly rankle investors given the sharemarket’s latest painful financial year when it finished down 10.2 per cent, just the third time in the past decade that Australian investors have suffered a negative return.

The CEO pay rises also come amid a broader debate on wages which are historically flat.

The ACSI data focuses on CEOs’ take-home pay which takes in the market value of any shares and options vested, even if they were granted in previous years.

When the sharemarket is rising, those parcels can push take-home pay beyond reported pay, which only looks at remuneration including the accounting value of shares and options related to that year.

The ACSI report works through an example showing Technology One CEO Ed Chung’s reported pay last year was $1.95 million, compared with his take-home pay which was calculated in the report at $4.12 million.

The Australian Financial Review’s annual CEO pay survey – released in November last year for the same period – focuses on the CEO’s statutory reported pay which is required to be disclosed each year in line with accounting standards.

It also revealed a 20 per cent rise in CEO pay packets last year topped by Macquarie Group CEO Shemara Wikramanayake with total reported pay of $15.97 million, knocking off CSL boss Paul Perreault with total reported pay of $13.87 million.

A host of other CEOs have enjoyed the benefits of the return of record CEO bonuses.

Three CEOs received a maximum bonus over the past three years – former Premier Investments boss Mark McInnes, Charter Hall’s David Harrison and Steadfast’s Robert Kelly. By contrast, Qantas CEO Alan Joyce was the only incumbent top 100 CEO not to receive a bonus in 2020 or 2021, after topping the CEO pay ranks in 2018 with $23.9 million take-home pay.

Getting out can pay

Woodside’s Peter Coleman received last year’s highest termination payment with $4.99 million, which included a $1.72 million cash bonus for less than four months’ work as CEO.

More controversially, $4.85 million was paid to Crown Resorts’ Ken Barton, who departed after being found not fit to hold a position of authority at a licensed casino. That included a $1.5 million consultancy agreement, uncovered in the Victorian royal commission into Crown.

Afterpay’s co-CEOs Mr Eisen and Mr Molnar set their $264.2 million record for realised pay last year (more than $100 million each) after exercising their $1 options when the company share price was almost $90.

The pair’s payday came ahead of the $39 billion sale of the company to Block, formerly known as Square, with Afterpay suspended from trading on the ASX on January 19 with the share price at $66.47. But Block shares have fallen from $176 to around $93 this year and the pair – who retain a major shareholding – have seen the value of their shares more than halve.

Reserve Bank of Australia governor Philip Lowe last month sought to put a lid on wage growth at about 3.5 per cent, after warning that regular pay rises of 4 to 5 per cent risked entrenching higher inflation.

His comments came after the Fair Work Commission last week delivered a rare split increase that lifted the minimum wage for 184,000 workers by 5.2 per cent, and 4.6 per cent for about 2.6 million workers on higher awards.