Board and executive salaries hit the skids – even before COVID-19, Governance Institute report shows

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The results are in from the organisation’s latest Board and Executive Remuneration Survey – and they are not pretty.

The survey, which looked at remuneration levels for directors and senior executives across 433 organisations, found almost two thirds of ASX300 organisations did not increase board fees in FY19.

Where there was an increase to board fees, the median increase for both chair and members was only 4%.

For senior executives within the ASX300, the median salary movement was just 2.4%.

The data also highlights salary changes in FY18 over FY18 – so it doesn’t reflect the recent impact of COVID-19 either.

“Even before the pandemic had hit the global markets, Australian firms, particularly in sectors like financial services, aged care and retail, were already battling strong winds on multiple fronts,” the report states.

Governance Institute of Australia CEO Megan Motto adds that there will be some “difficult discussions” currently underway.

“The economic fallout of COVID-19 is impacting boardrooms across Australia as many businesses take drastic measures including widespread pay cuts and layoffs,” she said. “There is clearly no one-size-fits-all solution when it comes to managing the impacts of a pandemic on executive remuneration.”

Some organisations have already announced short-term changes to executive and director remuneration to offset the impact.

Professional services firm Aon analysed the recent ASX disclosures of 226 organisations which revealed 87% of companies announced they would reduce chair and NED fees by an average of 51%.

72% had reduced their CEO’s fixed remuneration by an average of 37%.

Most (85%) of these organisations were in areas that have been hit harder by the pandemic such as retail hospitality, airlines and transport, but the figures highlight an important issue facing aged care providers.

Attracting talent to the sector depends on providing the salaries to match – historically, the sector has never been able to offer the remuneration you would see in other high-flying industries such as banking.

News that salaries are being further reduced will diminish the pool of talent for the sector – at a time when new thinking is needed to redesign the system.

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