CEOs hit by salary caps

Executive salaries are taking a hit as company boards respond to shareholder pressure and start capping salaries in the wake of the economic slowdown.

The Australian Financial Review 2008 annual survey of top earners revealed that the average salary package for chief executives in the first 300 sharemarket-listed companies was $2.97 million, an increase of less than 1 per cent from $2.96 million in 2007.

For CEOs of companies benchmarked by the S&P/ASX 200 index the median salary package fell by 16.9 per cent to $1.66 million, according to The Australian Financial Review.

Rupert Murdoch, executive chairman of NewsCorp, topped the list of highest earners in Australia but his take home pay of $28.6 million dollars was still 14.3 per cent less than last year.

Alan Moss, the retired CEO of Macquarie Group, was the second highest earner with a salary of $26.76 million, down 26 per cent on 2007.

The AFR reported that salary capping was likely to continue into next year as some company shareholders exercised their right to vote in general meetings against rewarding underperforming executives with cash bonuses or other incentives.

Criticism of executive salaries at a global level, particularly from Wall Street, recently led Prime Minister Kevin Rudd to request that measures be put in place that would stop what he called executive greed to stabilise the financial system.

“The government will now be working with APRA {Australian Prudential Regulation Authority] on how that is best as a template for the rest of the world, and secondly what domestic actions on top of that are necessary in Australia,” he said.

Mr Rudd said that the new rules would discourage excessive risk-taking by senior executives and CEO remuneration would be directly linked to the financial growth of the company.