Executive Compensation Benchmarking for ASX Listed Companies: A Practical Guide

Setting executive pay is a major responsibility for boards and remuneration committees of ASX listed companies. Executive compensation must attract strong leaders, reward performance, and meet shareholder expectations.

This is why executive compensation benchmarking is so important.

What Is Executive Compensation Benchmarking?

Executive compensation benchmarking means comparing your company’s executive pay with similar ASX-listed companies.

It helps answer key questions:

• Are we paying our CEO and executives competitively?
• How does our pay mix compare to the market?
• Are we aligned with shareholder expectations?
• Can we justify our pay decisions in the Remuneration Report?

For Australian listed companies, executive pay information is publicly available in annual reports and remuneration disclosures. This makes benchmarking both possible and practical.

---

Why Benchmarking Matters in Australia

Executive pay in Australia receives strong shareholder scrutiny.

ASX-listed companies must publish detailed remuneration reports. Shareholders vote on these reports each year under the “two-strikes rule.” If 25% or more of shareholders vote against the remuneration report at two consecutive AGMs, it can trigger a board spill resolution.

Because of this governance environment, benchmarking helps companies:

• Reduce the risk of a “first strike”
• Support transparent pay decisions
• Align pay with performance
• Maintain investor confidence
• Stay competitive in the executive talent market

In short, benchmarking protects both your leadership strategy and your governance position.

---

What Should Be Benchmarked?

Executive compensation includes several components. A complete benchmarking review should cover:

1. Fixed Pay (Base Salary + Superannuation)

The guaranteed portion of executive pay.

2. Short-Term Incentives (STI)

Annual bonuses linked to financial and non-financial performance measures.

3. Long-Term Incentives (LTI)

Equity-based rewards such as performance rights or options. These are typically linked to multi-year performance conditions such as TSR or EPS growth.

4. Total Remuneration

The combined value of fixed pay, STI, LTI, and other benefits.

Looking at total remuneration provides a clearer comparison than reviewing salary alone.

---

How to Benchmark Executive Compensation in Practice

Step 1: Select the Right Peer Group

Peer group selection is critical.

ASX-listed companies should choose peers with similar:

• Industry sector
• Revenue size
• Market capitalisation
• Complexity and geographic exposure

For example, an ASX 200 company should generally benchmark against similar large-cap companies, not small-cap firms.

A well-chosen peer group ensures meaningful comparisons.

---

Step 2: Use Reliable and Structured Data

Australian listed companies disclose executive pay in annual reports. However, extracting and comparing this data manually can be time-consuming.

Using structured executive compensation data helps:

• Compare total remuneration consistently
• Identify median and upper quartile pay levels
• Review STI and LTI opportunity levels
• Analyse trends over time

Clean, standardised data improves both accuracy and efficiency.

---

Step 3: Review Pay Positioning

Once the data is gathered, companies must decide how to position executive pay:

• At market median?
• Above median for high-growth or complex businesses?
• With a higher weighting toward long-term incentives?

Your remuneration philosophy should guide this decision.

---

Step 4: Align Pay With Performance

In Australia, shareholders and proxy advisors focus heavily on pay-for-performance alignment.

Benchmarking should not only compare pay levels, but also consider:

• Financial performance
• Total shareholder return (TSR)
• Strategic milestones
• Risk management outcomes

If pay outcomes appear misaligned with company performance, shareholder dissatisfaction may increase.

---

Common Challenges in Australia

Executive compensation benchmarking can be complex due to:

• Differences in LTI structures
• Varying performance hurdles
• Different reporting methods
• Changes in accounting valuations

Structured datasets that standardise disclosed remuneration figures can significantly reduce these challenges.

---

Practical Tips for Remuneration Committees

Here are simple best practices for ASX-listed companies:

• Review benchmarks annually
• Focus on total remuneration, not just fixed pay
• Keep peer groups relevant and updated
• Clearly document benchmarking methodology
• Prepare clear disclosure in the Remuneration Report

Good documentation supports transparency and reduces governance risk.

---

Final Thoughts

Executive compensation benchmarking is more than a compliance exercise. It is a strategic tool.

For ASX listed companies, strong benchmarking helps:

• Attract and retain executive talent
• Manage shareholder expectations
• Reduce the risk of a remuneration strike
• Support long-term company performance

With reliable and structured executive compensation data from ASX-listed companies, boards and remuneration committees can make informed, defensible, and confident pay decisions.