By Mathew Murphy
THE global financial crisis has prompted the first yearly decline in chief executive pay in more than a decade, according to a survey by global consulting company Hay Group.
The survey of 84 Australian companies, including more than half the ASX 50, shows chief executives' yearly reward dropped 6.8 per cent in the year to May 2009 after having growth of about 15 per cent a year for the past few years.
Trevor Warden, Hay Group's head of executive reward consulting, said the drop reflected the fall in corporate profits and that the pay of chief executives was increasingly being linked to company performance.
He said the portion of chief executive pay tied to fixed salaries had slowed in the year to May 2009, rising just 2.9 per cent compared with an increase of more than 10 per cent a year earlier.
''The fact that there is that negative movement in CEO pay shows they are being linked to performance,'' Mr Warden said. ''There has been a lot of negative press around CEO pay, but this does highlight that when CEOs were getting paid more it was in the good times and when we enter the bad times their pay does go down accordingly.''
The issue of executive pay is an emotive one and can result in widespread anger when chief executives are given an exorbitant pay cheque, including fixed pay and large bonuses, during a time of economic uncertainty and job cuts. It has led to some companies issuing a senior management pay freeze, including Telstra, Wesfarmers, ANZ, Westpac and Tabcorp.
Mr Warden said the sharp drop in executive pay was not reflected in the broader workforce because of ''relatively good pay rises thanks to recent enterprise bargaining decisions''.
''That's the risk a CEO takes with incentive pay - when the times are good and profits are rising strongly, they benefit, but things can also move into a reverse gear,'' he said.