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Australia
Melbourne, 8 September 2009

Despite the turbulent economic conditions, senior executives at some of Australia’s top listed companies received increased short term incentives, such as cash bonuses, in lieu of long term incentives for performance, Mercer’s most recent ASX 200 Executive Remuneration Survey has found.

Mercer’s analysis of pay for the top four reporting levels in some of the top ASX listed companies found that the average short term incentive (STI) payment for same incumbent executives (those who remained in the same job for the same period) was 14 per cent higher than what was paid out in 2008, but the average long term incentive (LTI), which refers to cash or share grants for performance over a longer period, was 11 per cent lower than in 2008.

Yolande Foord, head of Executive Remuneration at Mercer said short term incentives may have been favoured over longer term rewards this year as Boards and management focused on ensuring strong near- term performance and maintaining productivity during these difficult times.

“While on the surface an increase in STI payments may seem like a bitter pill for shareholders to swallow given the market conditions over the past year, the aggregate hides the fact that more than half of the same incumbents received a lower bonus than the previous year,” Ms Foord said.

“It indicates that bonuses are only being awarded to those who were able to meet their performance targets and that companies are being disciplined in managing their performance programs,” she said.

Mercer’s survey reported a 17 per cent decline in executives receiving LTI grants this year, with lower LTI values reflecting the decline in share prices.

For those who received an LTI, their average STI bonus remained relatively unchanged against the previous year.

“The scaling back of long term incentives reflects the increasing difficulty for employers to predict long term trends beyond the current market and set appropriate performance hurdles.

“It’s not surprising that a short term focus has prevailed as companies need to strike the right balance of continuing to motivate and reward top performers” added Ms Foord.

Mercer’s survey also found that about one third (32%) of incumbent executives did not receive a pay rise at all, but those who did fared better than expected. The total average pay increase was 5.7 per cent.

“Pay increases have not been granted across the board but there is recognition that those who remained with the organisation are the high performers and have taken on more as workforces were cut and recruitment halted,” Ms Foord said.

“Employers want to ensure they can hold onto these high performers who have remained productive and motivated and have ensured that their companies have not just survived but thrived throughout the economic downturn,” she said.

The survey also showed that newcomers to the survey were being paid approximately 10 per cent less than their predecessors.

"Pay trends indicate that it is a buyer’s market at the moment and companies who are recruiting may pay less for new talent due to increased availability,” Ms Foord concluded.

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