Australia’s highest-paid chief executive took home close to $38 million in 2019, but you’ve probably never heard of him.
Andrew Barkla – CEO of IDP Education – earned a whopping $37.76 million last year, according to the ACSI CEO Pay in ASX200 Companies report.
It’s the largest individual sum paid to a CEO in the report’s six-year history of recording realised pay, trouncing the $36.84 million paid to Don Meij (of Domino’s Pizza) in 2017.
If that name isn’t familiar, it may be because IDP Education is relatively new to the ASX.
The business was floated on the exchange with an initial public offering in 2015.
And although the business has been very successful in the intervening time, it is yet to crack the ASX100 – the 100 largest businesses by market capitalisation listed on the Australian exchange.
Instead, Mr Barkla’s record payout was the product of stock options given to him before the company’s IPO.
These options are commonly used as incentives to encourage staff by giving them equity in the company but only ‘vesting’ (turning into shares) after a period of time, or if certain targets are met.
And in the 2019 financial year, Mr Barkla sold 99 per cent of the shares he received on vesting – for a total of just over $36 million.
Added to his already generous reported pay of $2,252,275 (minus $700,000 or so in share-based payment expenses) and Mr Barkla finished the year with a pay packet 780 times larger than the median annual income.
Other notable entries in the top 10 include Treasury Wine Estate’s Michael Clarke, former No.1 Alan Joyce (of Qantas) in 8th, and Rio Tinto’s Jean-Sébastien Jacques at 10th.
No women appeared in the top 20 list.
Coronavirus will test appropriateness of pay
Despite Mr Barkla’s immensely profitable year, Australian Council of Superannuation Investors (ACSI) CEO Louise Davidson said this year’s report showed boards are actually exhibiting a “greater level of restraint” when assessing pay packets.
“More boards are using sensible discretion to rein in outcomes for senior executives,” she said.
Proof of that can be seen in the falling average pay packet size and the growing number of CEOs missing out on bonuses (more on that later).
But these numbers only cover company full-year reports filed in 2019, before the coronavirus pandemic struck (and before Rio Tinto’s Juukan Gorge explosion).
Although the report shows “growing maturity and sophistication” in the way CEOs are remunerated, Ms Davidson said that maturity will be “put to the test” in the incoming reporting season.
“The ramifications of both the health and economic impacts of the pandemic are still not fully understood,” she said.
“Companies will need to be mindful this year of how remuneration outcomes will be perceived externally, given the widespread impact of the pandemic on investors, staff, customers, governments and other key stakeholders.”
Ms Davidson said good CEO pay structures need to go beyond a simple ‘check-the-box’ system so remuneration matches the company’s performance.
Boards exhibit more restraint
The clearest indication of that trend were the 25 chief executives whose bonus were “zeroed out” because their company’s performance was “not adequate”, Ms Davidson said.
In 2018, only seven CEOs lost their bonuses due to poor performances.
Those who did receive their bonuses only took home an average of 60 per cent of what they could have earned – down from 70 per cent the previous year.
And the actual ‘realised pay’ (the amount of money a CEO actually receives as opposed to just their reported salaries) also decreased.
Average realised pay came down 8.2 per cent while the median dropped 7.4 per cent.