Executive Remuneration Benchmarking in Australia: Where the Numbers Come From

A CEO remuneration benchmark can appear straightforward: select comparable companies, collect executive pay figures and calculate the median. In practice, the same five annual reports can produce very different answers depending on which figures are extracted.

One analyst might compare fixed remuneration and target incentives. Another might use the statutory remuneration tables, which include accounting values for share-based payments. A third might compare amounts actually received by executives during the year.

Each analysis answers a different question. For Australian boards and HR leaders, the challenge is not finding numbers but understanding what those numbers represent before using them to make an executive remuneration decision.

Where does executive remuneration benchmarking data come from?

Australian organisations generally use a combination of public disclosures, commercial remuneration surveys and tailored market analysis.

ASX disclosures are useful because information can be traced to named companies and reporting periods. However, they do not automatically provide a comparable market salary for every executive. Commercial surveys may cover a broader market, but their reliability depends on the relevance and depth of the actual sample.

The best source depends on the decision. A listed company assessing its CEO against ASX peers may need extensive annual-report analysis. A private company reviewing a functional executive may obtain more relevant information from a structured survey of comparable roles.

Why the statutory remuneration table can be misleading

Consider an illustrative CEO remuneration arrangement:

The $900,000 figure describes an opportunity based on the stated assumptions; it does not necessarily represent cash paid, remuneration earned or the amount disclosed as an accounting expense during the financial year.

If the CEO earns half the target STI, the actual bonus may be $100,000. If the LTI remains unvested, its eventual value remains uncertain, while the company may still recognise a share-based payment expense under the relevant accounting rules. The statutory remuneration total can therefore differ from the target package and the amount actually received.

For Australian reporting, AASB 124 Related Party Disclosures addresses KMP remuneration disclosure categories, while listed-company remuneration reporting is also subject to the applicable provisions of the Corporations Act 2001. Always confirm the standards and rules applying to the actual financial period.

The practical rule: never compare one CEO's statutory accounting remuneration directly with another CEO's target remuneration package and call the result a market median.

Separate the five remuneration measures

When extracting data, keep the following measures distinct:

1. Fixed annual remuneration: the annualised fixed package, with employer superannuation and benefits treated consistently across the sample.
2. Target STI: the short-term incentive opportunity for achieving the specified target performance, not necessarily the amount ultimately paid.
3. LTI grant or opportunity: the award value or opportunity under the plan's stated valuation basis, which must be documented.
4. Accounting remuneration: amounts recognised for financial reporting, including applicable share-based payment expenses.
5. Realised or received remuneration: amounts that vested, were exercised or were paid, according to a clearly defined method.

These measures are useful for different questions. Target opportunity informs incentive competitiveness and design; actual STI outcomes can help explain performance and payout alignment; accounting disclosures support statutory reporting. None should be substituted for another without explanation.

Select executive peers based on accountability, not just job titles

A Chief Operating Officer managing a domestic workforce of 300 employees is not necessarily comparable to a COO overseeing international operations, several thousand employees and multiple business divisions.

Before examining pay levels, agree on the relevant peer characteristics. Depending on the position, these may include revenue, market capitalisation, workforce size, operational complexity, geographic reach, business model, accountability and executive reporting relationships.

Industry is important, but it should not be the only criterion. A specialised finance or technology executive may compete for talent across industries, whereas a highly operational role may require a more targeted peer group.

Record why each peer was included and which differences remain. This protects the analysis from the temptation to select highly paid companies simply to support a preferred outcome.

For guidance on peer selection, see Remunera's practical guide to benchmarking against ASX peers and industry competitors.

How to analyse an ASX remuneration report

You can undertake a preliminary comparison with a carefully maintained spreadsheet. Start with a small group of relevant companies, download the appropriate annual reports and document the year end for each source.

For every executive, record the company, position, reporting period, fixed remuneration, STI opportunity or outcome, LTI measures, other material remuneration items and the relevant report page or note reference.

Where an annual report presents both statutory remuneration and realised remuneration, retain both but label them clearly. Do not fill missing figures with an assumed percentage of salary unless the assumption is explicit and appropriate for the intended analysis.

A useful working table looks like this:

Illustrative entry only.

This level of documentation makes the work easier to review, especially when different companies disclose incentive information using different formats.

Why a small executive peer group needs careful interpretation

Executive benchmarking samples are often much smaller than samples used for broad-based employee salary surveys. A few unusually large or complex organisations can move the median significantly.

Suppose the reported fixed remuneration figures for five hypothetical peers are $400,000, $450,000, $500,000, $550,000 and $900,000. The median is $500,000. The $900,000 figure does not change this five-company median, but the peer's inclusion can still affect the reported range, mean and interpretation of upper-market remuneration.

More importantly, if the $900,000 company has a materially different operating scale, it may be a poor comparator regardless of the statistical result.

A useful sensitivity test is to recalculate the outcomes after excluding peers with materially different size or responsibilities, then examine how the sample and conclusions change. If the recommendation depends heavily on a small number of observations, present a sensible range and explain the uncertainty rather than claiming the market supports one exact salary.

Turn the data into a board-ready recommendation

An executive benchmarking report should do more than present market percentiles. The board or Remuneration Committee needs to understand how the evidence relates to the executive's role, the organisation's remuneration philosophy and its capacity to pay.

A practical recommendation should explain:

• Which companies and datasets were used, and why
• How the executive role was matched
• Which remuneration components and reporting periods were compared
• The market positioning and any material limitations
• The implications for fixed remuneration, STI and LTI separately
• Whether alternative assumptions would change the conclusion
• The recommended decision and reasons supporting it

A market median should not automatically translate into a salary increase. The current package might already be appropriate once the role's responsibilities, performance, internal relativities and incentive structure are considered.

Common mistakes to avoid

The most frequent weaknesses in executive remuneration benchmarking are comparing titles without role scope, mixing accounting expense with incentive opportunity, relying on a peer group that is too broad or too narrow, ignoring reporting-period differences and treating a percentile as an automatic pay recommendation.

These issues are preventable when the workbook preserves the underlying sources and assumptions, the reviewer challenges comparability and the board paper explains what the data does and does not establish.

When external executive benchmarking support is valuable

External support can be useful when the peer group is difficult to establish, executive roles do not match standard survey definitions, different remuneration structures need to be reconciled or the findings will inform an important board decision.

Remunera supports organisations with executive remuneration benchmarking, market analysis and remuneration frameworks. We focus on clear job matching, relevant Australian market evidence and practical recommendations that can be explained to decision-makers.

If your organisation is reviewing CEO, General Manager or senior executive remuneration, contact Remunera to discuss the scope of the benchmarking exercise.

Frequently asked questions

Can I benchmark executive remuneration using ASX annual reports?

Yes. Public annual reports can be valuable for a defined listed-company peer group, provided you account for differences in remuneration definitions, reporting periods and executive responsibilities.

Are CEO remuneration figures in annual reports the amount paid in cash?

Not necessarily. Statutory disclosures may include accounting measures, benefits and share-based payment amounts that differ from cash received or incentives realised.

Should I compare fixed remuneration or total remuneration?

Ideally assess both, but for different purposes. Fixed remuneration helps establish recurring pay positioning, while total remuneration analysis helps evaluate incentive opportunity and overall package design. Use consistent definitions.

How many companies should be included in an executive peer group?

There is no universally correct number. Prioritise role comparability and enough relevant evidence to support a meaningful conclusion, and describe limitations when the sample is small.

Is the market median the right salary for a CEO?

Not automatically. The market median is a reference point. The appropriate remuneration decision also depends on the organisation's size, complexity, performance, remuneration strategy and governance considerations.

This guide provides general information about benchmarking methodology and does not replace accounting, legal or governance advice for a particular organisation.