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CEO bonuses are back but one powerful group is asking why?

Peter Switzer
13 July 2022

Yesterday a friend of mine told me that his son, who is an accountant, was going to hand in his ticket (as a number cruncher who belongs to a professional association) to pursue his new love of being an investment banker. And given the kind of bonuses that bosses of public companies and investment banks can pocket it seems highly rational.

The AFR today has told us that Afterpay’s co-founders, Anthony Eisen and Nick Molnar did pretty well out of starting a new-age financial institution and listing it on the stock market, with their bonus coming in at an unforgettable $264.2 million! (For the record, I taught Anthony at both Sydney Grammar and later at UNSW, and he too once was an accountant.)

But Anthony and Nick aren’t the only leaders of public companies doing well out of bonuses.

The CEO of Macquarie, Shemara Wikramanayake earned $14,693,343 but she was topped by CSL’s Paul Perreault who snared $58,914,531.

Others in the list included the CEOs of well-known companies such as Woolworths, BHP, Fortescue, Ansell and Goodman Group.

The AFR’s Patrick Durkin tells us that “a total of 15 CEOs out of the S&P/ASX 200 took home more than $10 million in 2020-21” but a super fund watching group, ACSI, is surprised at the size of the bonuses given the ordinary year for stocks.

The Australian Council of Superannuation Investors (ACSI) was established in 2001, and it says it exists to provide a strong voice on financially material environmental, social and governance (ESG) issues. Its members include our big industry super funds and other big buyers of listed shares.

With reporting season starting in late July and hotting up in August, ACSI (and other shareholder activists) will be asking hard questions of CEOs and others in big company management teams if their share prices have gone in the opposite direction to bonuses paid out.

Some companies such as BHP and their CEO Mike Henry should be on safe ground with a good share price performance and a big dividend payment. But others could be in for a real grilling about their companies’ performance, given the big slump in share prices since early January this year.

That said, some share prices have been smashed on speculation that the company might not have done well but reporting season could tell a story that’s very different to what the speculators on the stock market have determined.

Also, because of the pandemic, bonuses were virtually banned. Now many CEOs are getting backpay bonuses this year. Of course, they’d be easier to stomach if the share prices were heading up rather than down over the past financial year.

Keeping it in perspective is important as normal people reel at what are abnormal payouts to top executives but the back story needs to be understood.

This was the headline in the AFR on December 14 last year, when Molnar and Eisen pulled off the sale to Square, now Block: “Afterpay shareholders overwhelmingly approve [the] Block (formerly Square) buy.”

Nowadays the share price has been clobbered, along with other buy-now-pay-later and tech companies but that’s the fate of anyone who wants high but risky returns in the stock market.

The current share price is $93.29 and a lot of the shareholder register would’ve bought in at a lot lower price. Here’s the chart in early February of Afterpay (APT) before it was rolled into Square, now called Block with the ticker code SQ2.

This shows many shareholders made a lot of money out of the vision and capabilities of Eisen and Molnar.

And while most of us can’t believe the money they’re paid, not many individuals worldwide pull off what they’ve done.

The lesson? Tell yourself or your children to be an accountant first, and then start or set their/your sights on running a listed company! And if you want to start a company that does an Afterpay, do what Anthony Eisen did, that is, find a neighbour with a good idea and then show him how to make it work!

Afterpay aside, we’re in for some fireworks, fun and games this reporting season as ACSI and other activists ask about these big bonuses for many CEOs.

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© 2006-2021 Switzer. All Rights Reserved. Australian Financial Services Licence Number 286531. 
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