Investors need to watch CEO remuneration
The long bull run in financial markets has helped drive up the salaries of Australian chief executives, but the size of their salary increases has not always accurately reflected the performance of their companies, according to new research released this week by WestLB Mellon Asset Management.
The research has prompted the company to warn investors to be vigilant with respect to CEO remuneration saying that total CEO remuneration is clearly now at elevated levels and that any further increase would need sound justification.
The research has looked at the remuneration paid to Australian chief executives and has suggested that some have actually benefited from the performance the sector their company operates in, rather than what they have managed to deliver to their company’s shareholders.
The research looked at CEO remuneration from 2006 to 2007 alongside prospective price earnings, and concluded that a number of chief executives had achieved substantial increases in remuneration while managing companies that were not highly regarded in the market.
Further, it said that CEOs within the booming resources sector had done particular well, with the median and top quarter increases in salary being 30 per cent and 63 per cent respectively, compared with the those companies within the industrial basket where the median and top quartile increases were 14 per cent and 33 per cent.
AUTHOR
Mike Taylor
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