Afterpay's co-CEOs and founders, Anthony Eisen and Nick Molnar, are Australia's highest-paid executives, collecting a combined $264.2 million — together, they earned more than 2,800 times the full-time average wage.
The 2021 financial year was a bumper year for CEO bonuses, according to a report by the Australian Council of Superannuation Investors (ACSI).
The average bonus awarded to ASX100 chiefs hit a record $2.31 million, beating the 2017 record of $2.30 million.
Mr Eisen and Mr Molnar – the one-time neighbours who created buy-now-pay-later giant Afterpay in their home in the affluent suburb of Rose Bay, Sydney – have set a joint record for realised pay (more than $100 million each).
Most of this was due to the vesting of large equity grants, accompanied by very strong share price growth.
The duo's gains came in August 2020 after each exercised 1.5 million options, at just $1 per option, at a time when the share price was nearly $90.
Conversely, only a small portion of the co-CEOs' combined pay was in cash ($972,000).
The duo are the only CEOs in the top 10 -aside from Goodman Group's CEO - to have started their own company, rather than being recruited to the role.
But the 2020 financial year figures do not reflect the true extent of the duo's fortunes.
With the $39 billion takeover of the company by US payments giant Square, Mr Eisen's and Mr Molnar's personal fortunes have substantially lifted, with the pair taking stakes in Square worth about $2.7 billion (paid out in stocks).
Even without the Afterpay duo's windfall, ACSI's report says a new record high would have been set by CSL's Paul Perrault (who also set the last record in the 2020 financial year) with realised pay of $58.9 million.
In 2020, Mr Perreault exercised his last legacy options, with exercise prices of $107.25, when the share price was $292, and another 82,800 zero exercise price options also vested for the CSL chief.
CSL had the contract to produce the AstraZeneca COVID vaccine in Australia, worth an undisclosed amount by the former government.
The former Morrison government also handed CSL subsidiary Seqirus $1 billion over a decade to underwrite the construction of a new vaccine production facility, and CSL itself has also been the beneficiary of government grants for medical research and innovation over the years.
Two additional ASX200 chief executives realised pay of more than $20 million – Goodman Group's Greg Goodman, at $37.1 million (up from $26.87 million in 2020), and Netwealth co-CEOs Michael & Matthew Heine with $25.85 million.
The realised gains for Mr Goodman reflected strong security price growth and the weighting of his incentive pay entirely to equity, with vesting of almost 2 million zero exercise price options, originally granted in 2015, 2016 and 2017.
The rise in CEO pay bonuses comes amid concerns that wages for Australian workers are not rising in line with the cost of living.
Australian Bureau of Statistics (ABS) data shows that in the 12 months to November 2021, the average full-time wage, with overtime and penalty rates, was $1,812.70 (about $94,260 annually).
In that context, in 2021 the Afterpay duo together earned more than 2,800 times the average wage.
And as the graph below shows, across all chief executives measured, the average relative to adult earnings has lifted because of the Afterpay founders' high payout.
Bonuses are back 'in a big way'
While Australian boards responded to the market turmoil and community impact of the COVID-19 pandemic with reduced CEO pay outcomes in 2020, bonuses were back in 2021, "in a big way", according to ACSI.
Where the median bonus received in 2020 was just 30 per cent of potential maximum, it shot up to a record-breaking 76.7 per cent in 2021 – the highest in the seven years since ACSI began publishing its reports.
The report found that three chief executives received maximum bonuses over the past three years – Premier Investments' departing chief Mark McInnes, Charter Hall's David Harrison and Steadfast's Robert Kelly.
By contrast, Qantas's Alan Joyce was the only incumbent ASX100 chief executive not to receive a bonus in either 2020 or 2021.
Some of the highest-paid CEOs earning big bonuses were working for companies that were major beneficiaries of the former Coalition government's JobKeeper wage subsidy.
Solomon Lew's Premier Investments got paid a total of $87 million in JobKeeper payments and after much public discontent that companies making profits were getting the taxpayer subsidy, Mr Lew and Me McInnes bowed to pressure to repay $15.6 million of it.
Steadfast was another company that was a recipient of JobKeeper, getting a total of $3.6 million.
Fixed pay for ASX100 CEOs rebounded from pandemic lows
While ASX100 CEO median and average fixed pay edged up in 2021, that was mostly due to COVID salary reductions having artificially depressed 2020 results, ACSI said.
But the long-term trend is down: Over the 10 years to 2021, and since the introduction of the "two strikes" rule, median ASX100 CEO fixed pay has fallen 0.6 per cent annually while the average has declined 0.8 per cent.
The number of CEOs with fixed pay above $2.5 million included BHP's Mike Henry, NAB's Ross McEwan and Westpac's Peter King (all appointed during 2020), as well as CBA's chief executive Matt Comyn.
Premier Investments' departing CEO Mark McInnes was the only ASX101-200 CEO with fixed pay above $2.5 million in 2021.
Many CEOs are counting their cash
Median cash pay for ASX100 chief executives rebounded 41.6 per cent from $1.98 million to $2.80 million, after the impact of the pandemic in 2020 (which was the lowest recorded since 2003).
Premier's Mr McInnes received cash pay of $5.5 million (as mentioned, partly driven by fixed pay of $2.75 million).
There was only one ASX100 CEO with cash pay above $5 million — Magellan's Hamish Douglass.
All up, 12 ASX100 CEOs got cash pay above $4 million in 2021, up from just four in 2020.
ACSI's report suggests that "high cash pay, especially if it recurs over time, allows executives to accrue substantial wealth, free from the future risks faced by shareholders".
It notes that the now-former chief executive of Premier, Mark McInnes, received cash pay of at least $4.5 million from 2016 to 2021.
Even CSL's Paul Perreault, who has derived much of his wealth over the past three years from vesting of equity incentives and a rising share price, has received cash pay in that same three years of $16.35 million.
Termination payments total $32 million
The $32.05 million collective cost of departing ASX200 CEOs in 2021 was just under the $33.18 million reported in 2020.
There were 17 termination payments in 2021, with 12 above $1 million.
Former Woodside CEO Peter Coleman received the highest termination payment at $4.99 million.
ACSI noted that this was driven by a combination of payment in lieu of notice, the payout of accrued leave entitlements and the $1.72 million cash bonus he was awarded for less than four months as chief executive.
Almost as large was the $4.85 million paid to former Crown Resorts former chief Ken Barton, who departed the group after the NSW Bergin Inquiry found him to be not fit to hold a position of authority at a licensed casino.
His departure payments included a redundancy payment, despite a new CEO being appointed, and a $1.5 million fee under a six-month consulting agreement uncovered by the Victorian royal commission into Crown's Melbourne casino, ACSI said.
A number of long-serving CEOs who departed during 2021 had no or minimal disclosed termination payments but were retained by their former companies as "advisors" after their departures.
ACSI's report says: "It is not clear how much remuneration was paid in relation to these advisory positions, and it is noteworthy Crown was not required to disclose the consulting fee paid to Barton as part of his termination payments, even though it acknowledged the existence of the agreement."
The highest termination payment in the ASX101-200 sample went to former Inghams CEO Jim Leighton at $2.14 million (the highest payment recorded to an ASX101-200 CEO since 2018).
Mr John said the "golden parachutes paid to CEOs when they leave" was a concern for investors.
The same CEOs keep topping the lists, and some are domiciled outside Australia
ACSI's report says that the same names keep repeating in the realised-pay Top 10 and suggests that is strong evidence that "CEO pay outcomes are not wholly explained by share price return".
In terms of the highest-paid ASX101-200 CEOs on a realised-pay basis, father and son co-CEOs at Netwealth, Michael and Matthew Heine, were included after 1.4 million performance shares, granted to Matthew prior to IPO, vested in February 2021 with a value of $24.7 million.
IDP's Andrew Barkla, who had the highest realised pay in the 2020 ASX101-200 sample, made the ASX100 Top 10 for realised pay in 2021.
This was due to options granted prior to IPO. Mr Barkla exercised the final 295,000 of these options, at $1.44 each, in September 2020 when the shares were down by $19.61.
IDP was also a big JobKeeper recipient. It got $10.5 million worth in payments but did not pay any back.
The 2021 study includes realised pay for 13 CEOs of companies that are domiciled outside Australia but included in the ASX200, whose realised pay ranged from $1.93 million (Chorus CEO JB Rousselot) to $37.4 million (ResMed's Mick Farrell).
This was the second year in succession that Mr Farrell received the highest level of realised pay in the "foreigner" sample and ASCI's report suggests that "the link between a US domicile, or influence, and high levels of pay was clear".
Can we shift the way CEO performance and pay are measured?
Oxfam's acting CEO Anthea Spinks says when the gap between CEO pay and workers' wages widens, that exacerbates inequality, especially for the most vulnerable, who are already hurting from inflationary pressures.
"Continuing to have such high salaries, such high bonuses is really sending the wrong message to those lower-paid workers, often workers in their [the CEOs] own companies who are not being fairly and adequately compensated.
"We're going to see more and more people fall in between the cracks."
PwC partner Andrew Curcio, who advises top-listed companies on their pay structures, says it is becoming increasingly important for boards to assess CEO performance on broader metrics than just financial measures.
He says investors are increasingly pushing companies to also take into account ESG (Environmental, Social, and Governance) principles.
"With a large proportion of an equity pay packet in shares, it is important to ensure that the board looks at the return on investment for shareholders," he said.
"One way to address this is to redistribute some of that wealth creation that shareholders have experienced to the broader workforce."
Mr John noted that ACSI's report was backward-looking, but that over the coming AGM season, investors would be closely watching whether boards continue to hand out massive bonuses.
The votes of institutional investors, as well as retail investors, can result in what's known as a "strike".
A "two-strikes" law, introduced in 2010, aims to hold directors accountable for exorbitant executive salaries and bonuses.
"I think there'll be a lot of scrutiny this year, " Mr John said.
