How much a CEO gets paid is one thing but how a company treats staff is another.

CEOs earning exorbitant salaries is one thing. How those organisations treat staff & operate is another

This week the Australian Council of Superannuation Investors (ACSI) released its annual report exploring CEO pay in top listed companies.

We learned that CEO pay is at a record high, that the top 10 paid CEOs in the ASX200 were all men and that CEOs of ASX100 companies earned an average $6.2 million in ‘realised pay’ in 2017.

We learned that the top paid CEO in Australia last year was the Domino’s Pizza CEO Don Meij who took home $36,840,000. Let me repeat that: in a single year a single person earned nearly thirty seven million dollars. (Who knew Australians even ate enough pizza to cover that?)

We learned that all but six of the 80 CEOs who were eligible for a bonus received one and that bonus payments grew by 18%.  We learned the median bonus awarded to an ASX100 CEO was 70.5% of their maximum entitlement.

We learned there were too few female CEOs in the ASX200 for the gender pay gap to be analysed meaningfully. We learned (again) that there were more CEOs called Andrew in the ASX100 sample than women.

Unsurprisingly the report has raised questions about the legitimacy of these salaries which the Prime Minister Malcolm Turnbull described as “extraordinarily high”.

“At a time when public trust in business is at a low ebb and wages growth is weak, board decisions to pay large bonuses just for hitting budget targets rather than exceptional performance, are especially tone-deaf,” ACSI CEO Louise Davidson said. “This may be a sign that boards have lost sight of the link between a company’s social licence and the expectations of communities and investors.”

In this week’s Talk It Out podcast (which will drop later today) Angela Priestley and I interviewed the Diversity Council of Australia CEO Lisa Annese and discussed this. To her mind, CEO pay is one issue but a far more revealing and pressing issue is the link between CEO pay and how an organisation treats staff and operates.

Do boards reward CEOs for promoting and retaining a diverse workforce? For narrowing any gender pay gap? For implementing flexible work arrangements? For fostering an inclusive culture?

Do boards consider the organisation’s status as a responsible corporate citizen when setting pay and bonuses? Do they pay staff and suppliers fairly? Do they contribute to the communities in which they operate?

If the answer to these questions is yes and the financial performance of an organisation is strong, then perhaps exorbitant salaries and bonuses are deserved. But if those issues aren’t even considered and CEOs still walk away with millions there is a very clear disconnect.

Given that all but six of the 80 CEOs who were eligible for a bonus received one you have to conclude most ASX boards believe their CEOs are absolutely nailing it. Given the headlines in the past 12 months – from banks behaving badly to corporations seemingly systematically underpaying staff to the proliferation of sexual harassment in workplaces, it’s difficult to believe corporate leaders don’t have room for improvement.

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