On Friday, BDO Western Australia chairman Sherif Andrawes launched an expanded remuneration report that examined some 1600 employers across multiple sectors.
The sophomore report’s coverage has been expanded from 900 companies from last year’s inaugural report, and now looks at companies ranging from plus billion dollar behemoths to tiddlers with market capitalisations below $25 million – the 2017 cut off.
Andrawes said he was surprised no one had attempted to demystify executive remuneration in the same way before, but he said that at a time when there were more initial public offers on the table than at any point for a decade, and rising competition for staff, that it was more important than ever to understand what was actually happening in the market and not simply rely on the common understanding.
The BDO report looked at five tiers: companies larger than A$3 billion; companies with market capitalisations between $600 million and $3 billion; $125-600 million; $25-125 million; and below $25 million.
Most mining and exploration companies sit within the lower tiers, with around 530 of the 1600 companies surveyed across all industries with market capitalisations in the lowest band
BDO examined at 11,000 executive positions across 13 roles, ranging from chairs, directors through CEOs, chief financial officers and business unit leaders such as head geologists, and noted that over the past 12 months there was a small improvement in remuneration trends.
BDO remuneration and reward services managing director Allan Feinberg said that upward pressure would continue, in part due to a need to foster and compensate the next generation of CEOS, and from competition for workers with specific skillsets.
“From sector perspective, if we look at mining and energy, this has been held back in recent years … and we should see larger than usual increases, and this buoyancy in the market is supported by BDO’s Explorer Quarterly Cash Update.”
That survey shows a 16% increase in total exploration spending, however administration costs – including wages – have been lagging, Feinberg said.
“This doesn’t necessarily mean there are going to be wage increases at juniors and explorers for fixed pay, but what it does mean is there may be a need to relook at the total package, which includes the incentive structure, so as to ensure those executives are being paid commensurate, and competitive market rates.”
CEO pay tends to be linked to market capitalisation, can ranges from between $130,000-$330,000 in the sub-$25 million tier up to more than $2.5 million per annum in the top tiers.
While the statistics shouldn’t be taken as gospel, they are an indicator of what the market is willing to pay, and what executives will come to expect, he said.
Curiously, most likely because of the higher number of smaller exploration companies based in Perth, the average CEO in the west commands a lower pay packet than those in the east, where better paying professions such as real estate and finance are concentrated.
Energy company CEOs also attract higher remuneration between $171,000-$494,000 with a median average of $321,000 compared to mineral CEOs who command a package between $149,000 and $356,000 with a median $249,000.
Summing up, Feinberg said board and executive remuneration settings at larger concerns should invariably trickle down to smaller companies, across short-term and long-term incentives and base salaries.
But, as a company working in the remuneration space, he said many small and mid-tier companies were not seeking professions advice and were not good at reporting remuneration and incentive policies, so even with the report it was difficult for board to set an appropriate level of remuneration.