Australian CEO pay packets fall but bonuses rise, new study finds

A new report has revealed the pay packets of the leaders of Australia's top-100 listed companies have shrunk to a decade low, as the use of bonuses among business elite are questioned.

Chief executive pay packets shrank by 3.3 per cent to an average of $1.9 million in 2015, the Australian Council of Superannuation Investors' (ACSI) latest annual study found.

While the fixed pay of current chiefs was either steady or rising slightly, firms were hiring new leaders on lower pay packets.

ACSI chief executive Louise Davidson said firms appeared to be taking into account investor and consumer concern about excessive pay levels since the introduction of the "two-strikes" law in 2011.

Under the changes, if at least 25 per cent of shareholders reject a company's remuneration report two years in a row, investors can then vote to force the entire board to stand for re-election.

The law is intended to hold boards to account for executive pay.

"We think that the two-strikes legislation has led to a much higher level of accountability between companies and their shareholders," Ms Davidson said.

"For example, in our own practice, we have found that companies are much keener to talk to us before their AGMs, before they actually publish their remuneration, to make sure that shareholders are not going to be unhappy with the remuneration they're proposing for their CEOs."

Similar studies suggest chief executive pay continues to rise in the US and the UK, which do not have such legislation.

Bonuses could be boosting bosses' pay

While fixed pay declined, however, the report found 93 per cent of ASX 100 chief executives received a bonus last year, the largest proportion since 2008.

And for bosses who did receive a bonus, the median payout was 76 per cent of the possible maximum amount on offer.

That suggests firms could be using bonus pay, which should be linked to a company's performance — or outperformance — to boost their leaders' fixed pay, Ms Davidson said.

"Our concern is that bonus hurdles are not high enough to justify them being called bonuses," she said.

"So we're really saying 'what sort of expectations are being set by companies if CEOs are able to routinely earn 76 per cent of their bonus potential'."