The Bucks Stop Here: Private Sector Executive Remuneration in Australia

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THE BUCKS STOP HERE:
PRIVATE SECTOR EXECUTIVE REMUNERATION
IN AUSTRALIA
A REPORT PREPARED FOR THE LABOR COUNCIL OF NEW
SOUTH WALES
By John Shields, Michael O’Donnell & John O’Brien

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THE REPORT’S AUTHORS:
Dr. John Shields
Senior Lecturer
Discipline of Work and Organisational Studies
School of Business
Faculty of Economics and Business
The University of Sydney
j.shields@econ.usyd.edu.au
Dr. Michael O’Donnell
Senior Lecturer
School of Management and Policy
Division of Business, Law & Information Sciences
The University of Canberra
Michael.odonnell@canberra.edu.au
Dr. John O’Brien
Senior Lecturer
School of Industrial Relations and Organisational Behaviour
Faculty of Commerce
The University of New South Wales
John.obrien@unsw.edu.au

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EXECUTIVE SUMMARY.
The Labor Council of NSW commissioned the authors to look behind the current debate on
executive pay levels to gauge whether Australian executives are delivering value for the ever-
increasing investment from shareholders. In particular we were asked to consider the use of share
options, ostensibly as a way of linking executive rewards more closely to growth in ‘shareholder
value’. This research fills a gap in existing understanding of executive remuneration by analysing
the actual performance of executives and the organisations which they head in light of their salary
and non-salary packages.
Our methodology has been to analyse existing data, particularly the Australian Financial Review’s
annual review of executive remuneration in Australia’s largest 100-150 companies. We have
applied this data to other publicly available information pertaining to corporate performance to
obtain a stronger picture of the impact, if any, of high executive salaries and generous option
packages.
The evidence presented in this report suggests that existing executive remuneration practices are
defensible neither in terms of distributive justice nor organisational effectiveness. Key findings of
the study are as follows:
• Executive Remuneration levels in Australia grew over the decade 1992-2002 from 22 times
average weekly earnings to 74 times average weekly earnings. (Chapter 1)
• At the same time, executive option packages, with ‘long-term incentives’ (share bonuses, share
purchase plans and share option entitlements) for Australian CEOs increased from 6.3 per cent
of total remuneration in 1987 to 35.2 per cent of total remuneration in 1998. (Chapter 1)
• The often-stated link between high executive pay and company performance does not exist.
Indeed, the evidence is that as an executive’s pay increases, the performance of the company
deteriorates. Against three criteria: return on equity, share price change and change in earnings
per share, statistical analysis shows that high excessive pay levels actually coincide with a
lower bottom line. (Chapter 3)
• Applying this analysis, the authors identify a performance-optimal range for executive
remuneration of between 17 and 24 times average wage and salary earnings, beyond which the
performance of a company begins to deteriorate. (Chapter 3)
• The finance sector emerges as a case study in corporate excess, with CEOs of the four major
banks averaging 188 times the pay of their customer service staff. Substantial elements of
executive packages are hidden from shareholders, and not withstanding the growth in bank
profits in recent years, the accompanying increase bank CEO cash and equity-based
remuneration has not been matched by sustained improvements in shareholder-focussed
measures of financial performance. (Chapter 4)
The authors offer recommendations to address the current situation (Chapter 5), including:
1. Government use of purchasing policy to encourage firms with moderate executive packages.
For example, executive pay levels could be considered when awarding government tenders and
contracts, with recognition that executive pay levels in excess of the optimal performance level
are less likely to deliver a good return for shareholders or the taxpayer.

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2. The Australian Stock Exchange’s (ASX) regulatory functions are compromised, as the ASX
is itself a privately listed company. These functions should be transferred to a fully independent
entity such as the Australian Securities and Investment Commission (ASIC).
3. Restrict the use and abuse of share options by means of a specified cap on the ratio of executive
options to the company’s total share issue and via the imposition of a minimum vesting period
of three years.
4. End the taxpayer subsidy of executive pay and perks by placing an enforceable limit on
‘reasonable business expenses’ and requiring the payment of income tax on share grants.
5. Require that executive termination payments providing benefits in excess of those available to
other company employees should be approved by shareholders within twelve months of hiring
of the new executive.
6. Action, including legislation, to make superannuation funds more accountable for executive pay
decisions, with nominees required to report to members on executive pay decisions.
7. Registration of all organizations providing commercial services in the field of executive
remuneration, with annual reports required to a relevant statutory authority.
8. Corporate government requirements, including arms length-remuneration committees, and
board independence should be enshrined in the Corporations Act.
9. Introduction of more stringent disclosure requirements, requiring formal shareholder approval
for all executive salary decisions.
These recommendations involve significant legislative change and their implementation will
therefore require considerable political and ethical will. They also highlight the limitations of ‘self-
regulation’. Executive pay is too important an issue to be left to corporate boardrooms, the
remuneration consultants, and the self-regulators. If the level of wages paid to ordinary employees
is rightly a matter of social and economic interest, then so too are the stratospheric sums paid to
those at the top end of the corporate hierarchy.

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CONTENTS
Executive
Summary
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Contents
v
Chapter 1
The Rise and Rise of Executive Pay: Australian and International
Trends.
1.1 Cashed Up: Base Salary, Benefits & Cash Incentive Payments
1.2 Optional Extras: Equity-related Wealth
1.3 Golden Handshakes: Rewards for Executive Failure
1.4 Middle of the Pack: International Comparisons
1.5 Conclusions
1
Chapter 2
Rewarding Excellence or Reward Excess? Debates About Executive
Pay.
2.1 The Case For
2.2 The Case Against
2.3 Conclusions
12
Chapter 3
The Missing Link: Executive Pay and Organisational Performance.
3.1 Perverse Incentives: Less for More and More for Less
3.2 Beyond Rent Extraction: Pay Levels for Optimum Performance
3.3 Performance Hurdles: Alternative Options?
3.4 Conclusions
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Chapter 4
Banking the Bucks: Senior Executive Remuneration in the
Australian Banking Industry.
4.1 Executive and Non-Executive Director Remuneration in the Four
Major Banks
4.2 Performance Hurdles for Bank Executives.
4.3 Commercial-in-Confidence: Non-Expensing and Non-Disclosure
4.4 Performance at a Price
4.5 Profits versus Social Responsibility
4.6 Conclusions
36
Chapter 5
Options For Reform.
46
Bibliography
51
Statistical
Appendices
1. Australian Financial Review Executive Remuneration Survey
1998-1999
2. Australian Financial Review Executive Remuneration Survey
1999-2000
3. Australian Financial Review Executive Remuneration Survey
2000-2001
4. Australian Financial Review Executive Remuneration Survey
2002-2002
58
62
66
71

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CHAPTER 1
The Rise and Rise of Executive Pay: Australian and International
Trends.
Of all developments in reward and remuneration practice in Australia since the late 1980s, none
have been more pronounced nor more controversial than those associated with executive pay. The
two key trends in this regard have been:
1. An exponential growth in the absolute level of executive total cash remuneration.
2. A shift in the composition of total executive remuneration away from base salary and benefits
to incentive pay and, in particular, long term incentives in the form of share options.
This chapter considers each of these two trends in more details and compares treads in Australia
with those in other developed countries, particularly the USA and the United Kingdom.
1.1 Cashed Up: Base Salary, Benefits & Cash Incentive Payments
Each November since 1999 the Australian Financial Review has published an annual review of
executive remuneration for Chief Executive Officer (CEO) and equivalent positions in Australia’s
largest publicly listed companies, based chiefly on information provided in company annual reports
for the previous financial year. These annual data sets are reproduced with several corrections in
Statistical Appendices 1 to 4. For all but the first year of survey data (that is, 1998-1999
1
), this
annual data provides a relatively consistent and reliable gauge of top executive remuneration levels
and trends.
Taking market capitalisation as a proxy for both organisational size the ‘size’ of the associated
executive position, the Australian Financial Review data permits an analysis of executive cash
remuneration levels and trends by position size. Exhibit 1.1 details the average levels of the cash
component of total remuneration (i.e. base salary, benefits, bonuses and other cash incentives) for
four categories of position size - from the largest 150 positions to the largest 20 positions. As these
data indicate, the larger the company and the larger the position, the higher the level of cash
remuneration. Executives in all categories also enjoyed sharp increases in total cash payouts over
the three year period, with those occupying the 50 largest positions enjoying the highest growth.
For the 1999-2000 financial year, the average annual cash remuneration of the largest 100
executive positions was $AU2.02 million. By 2001-2002, the comparable figure had risen to
$AU2.61 million, or an increase of 29.2 percent in just two years. For the top 50 positions, average
executive cash remuneration in 2001-2002 was $AU3.94 million (up 45 percent on the 1999-2000
figure), and for the top 20 positions in the highly capitalised firms the average was $AU5.9 million
(up 33.8 percent on the 1999-2000 figure).
While these figures relate only to the cash component of total executive remuneration, they
illustrate graphically the massive pay gap between Australia’s top executives and ordinary wage
and salary earners. As Exhibit 1.1 reveals, in 2002, average cash remuneration for the top 100
executive positions was 41 times the level of average annual full-time adult total earnings; for the
top 50 positions it was 82 times higher; and for the top 20 positions it was 122 times higher.
Comparable data from other sources provides clear evidence of the growing gap between executive
cash remuneration and that of ordinary employees. Data compiled by consulting firm John V Egan
Associates Pty Ltd and reproduced in Exhibit 1.2 reveals that the average cash remuneration of the
50 highest paid CEOs in Australian companies rose by just under 400 percent in the decade to
2002. The average rose from $AU0.7 million to $AU3.5 million (or an average of $AU280,000 per
1
Data for 1998-1999 (see Statistical Appendix 1) excludes non-resident executive chairpersons, including
Rupert Murdoch, and is not therefore directly comparable with data for subsequent years.

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year,) with the largest increases occurring in the last 5 years. Over the same decade, average
annual full-time adult total earnings rose by just 49 percent (or an average of 4.9 percent per
annum). In round terms, then, over the course of this decade, top CEO cash remuneration grow at
eight times the rate of ordinary worker earnings. As a consequence, the average pay of the 50
highest paid CEOs rose from 22 times average annual full-time adult total earnings in 1992 to 74
times the latter in 2002. Significantly, over this period top CEO pay also increased at more than
double the rate of share price appreciation of the largest 200 listed companies (see Exhibit 1.2).
Exhibit 1.3 illustrates the extent to which CEO cash remuneration outstripped growth in both share
prices and adult full time earnings over this decade.
This exponential growth in the cash component of executive remuneration since the early1990s has
been driven primarily by a greater use of variable or performance-related pay in the form of cash
incentives. This is illustrated by the data in Exhibit 1.4. Although this remuneration data (from
consulting firm Mercer Cullen Egan Dell) covers a larger and more diverse cohort of executives
than either of the data sets used in Exhibits 1.1 and 1.2, it demonstrates very clearly the growth in
the relative importance of cash bonuses. In the decade to 1998, average cash incentive bonuses paid
to executives included in this data set rose by 386 percent, whereas the fixed component of cash
remuneration (i.e. base salary, allowances and benefits) rose by just 112 percent.
Exhibit 1.1
Average Cash Remuneration for Executive Positions in the Largest Listed Companies#, Australia,
1999-2002.
Largest 150 Positions Largest 100 Positions Largest 50 Positions Largest 20 Positions
$AU million
Base Salary,
Super & Benefits
1999-2000 N/A 1.18 1.50 2.10
2000-2001 1.09 1.33 1.94 2.70
2001-2002 1.22 1.50 2.20 3.42
Change 1999-2002 (N/A) (+27.1%) (+46.7%) (+62.9%)
Cash Bonuses &
Incentives
1999-2000 N/A 0.84 1.23 2.32
2000-2001 0.86 1.18 2.09 3.16
2001-2002 0.78 1.10 1.73 2.48
Change 1999-2002 (N/A) (+31.0%%) (+40.7%) (+6.9%)
Total Cash
Remuneration
1999-2000 N/A 2.02 2.72 4.41
2000-2001 1.98 2.54 4.08 5.91
2001-2002 2.00 2.61 3.94 5.90
Change 1999-2002 (N/A) (+29.2%) (+44.8%) (+33.8%)
2002 Cash
Earnings Gap+
41:1 54:1 82:1 122:1
# By market capitalisation, excluding property and other trusts.
+ Ratio of average executive cash remuneration to average annual full-time adult total earnings of $48,276 (annualised
weekly earnings figure for November 2002).
Sources: AFR, 1 November 1999, 16 November 2000, 16 November 2001, 6 November 2002; Australian Bureau of
Statistics: Average Weekly Earnings, Australia, Cat.6302.0 (data for November, 2002).

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Exhibit 1.2
Growth in CEO Cash Remuneration, Share Prices and Adult Earnings, 1992-2002
Year Average CEO
Cash Remuneration*
(ACR)
($AU million)
Share Price
Change**
Average Annual Full
Time Adult Total
Earnings***
(AFTATE)
($AU)
Cash Earnings Gap
(ACR:AFTATE)
1992 715,566 100 32,307 22:1
1993 752,791 110 33,399 22:1
1994 901,114 130 34,892 26:1
1995 1,045,122 138 36,446 29:1
1996 1,180,000 159 37,798 32:1
1997 1,421,915 202 39,166 36:1
1998 1,694,479 205 40,664 41:1
1999 2,048,673 237 41,672 49:1
2000 2,600,000 273 43,648 59.6
2001 3,100,000 308 46,020 67:1
2002 3,550,000 284 48,276 74:1
Change
1992-
2002
+396% +184% +49%
* Average CEO cash remuneration, 50 leading companies, John V Egan Associates Pty Ltd Data Base.
** Standard and Poors ASX200 Accumulation Index (data for month of June; 1992=100).
*** Based on Average Weekly Full Time Adult Total Earnings for November Quarter.
Sources: John V Egan Associates Pty Ltd; Reserve Bank of Australia - www.rba.gov.au/statistics;
Australian Bureau of
Statistics: Average Weekly Earnings, Australia, Cat.6302.0.
Exhibit 1.3
Growth Indices for CEO Cash Remuneration, Share Prices and Adult Earnings, 1992-2002
Sources: As for Exhibit 1.2.
0
100
200
300
400
500
600
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Year (1992 = 100)
CEO Pay
Share Price
Av. Earnings

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Exhibit 1.4
Average Private Sector CEO Cash Remuneration in Australia, 1988-98.
Base Salary
Allowances &
Benefits
Total Fixed Pay
Incentive
Bonuses
Average Cash
Remuneration*
$AU
1988 112,104 59,912 170,016 12,207 184,263
1993 160,932 72,307 233,239 22,914 256,153
1998 237,476 91,046 328,522 59,533 388,055
% change
1988-98
(+112%) (+52%) (+125%) (+386%) (+111%)
* Excludes income from LTIs, including share options.
Sources: Kryger, T. ‘Private Sector Executive Salaries’, Research Note 24, Parliamentary Library, Parliament of
Australia, 1999; CEO data from Mercer Cullen Egan Dell Ltd., Annual Salary Survey (n=c.170)
1.2 Optional Extras: Equity-related Wealth
The increases in the cash component of executive remuneration are only part of the story; indeed,
compared to the astronomical levels of earnings and wealth accruing to the top executive echelon
via executive share ownership and share option plans, the cash component is small beer. Until the
1980s, fixed pay (salary plus benefits) comprised the major element of executive pay in most
Australian organisations. Over the last decade, however, the composition of executive remuneration
has shifted radically away from cash remuneration and towards equity-based wealth creation. Until
recently, this has involved a growing emphasis on the use of ‘long term incentives’ in the form of
share option plans. Long term incentives cover three main types of remuneration: share bonuses,
share purchase plans, and share option entitlements.
Share option plans give the executive the right to buy a specified number of company shares at a
predetermined price at some point in the future. Options to purchase shares are granted to
employees at ‘nil cost’. The price payable to convert the option to a share is usually set at the
market value of the shares at the time the option is granted. If the market price increases after the
option is granted the executive stands to make a net gain by exercising the option to acquire the
shares, then selling them in the general market. In theory, the incentive is to improve organisational
performance so as to drive share price up.
Data complied for the Hay Group and the Australian Human Resource Institute in 1998
demonstrates very clearly the growing importance of option plans and other long-term incentives.
As Exhibit 1.5 shows, between 1987 and 1998, the contribution of long-term incentives to the
average total remuneration of Australian chief executive officers rose from just 6.3 percent to over
35 percent, while the contribution of short-term (cash) incentives increased from 3.2 percent to 14.5
percent. Over the same period, the contribution of base pay declined from 90.5 percent to 50.4
percent. Similar though less pronounced changes were also recorded for other executive level
employees.
For executives in the largest companies, the value of share and option holdings is now many times
larger than the cash component of the annual salary package. In 2001-2002, the average annual
cash component of the remuneration of the largest 100 executive positions was $AU2.61 million.
For the same group of executives, the estimated average gross value of share options held was
$AU11.90 million, or more than 4 times the value of the cash component.
2
The estimated market
2
The figures for gross option value are based on a very simple (start-of-year nominal present
value) method of valuing unexercised options and take no account of future share price
fluctuation, the purchase costs associated with exercising options or the effects of taxation.

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value of shares held by these executives in the employing company was $AU160 million, or 62
times the value of the cash component. As Exhibit 1.6 indicates, in the years 1999-2001 the average
estimated value of shares held executives in this category peaked at $AU191 million (or almost 80
times the cash component). For the top 20 executives, the peak value of shares held was over
$AU770 million (or upwards of 130 times the cash component).
Exhibit 1.5
Composition of Total Executive Remuneration, Australia, 1987-1998.
1987 1990 1995 1998
Chief Executive Officer Fixed Pay 90.5 81.7 62.0 50.4
Short Term Incentives 3.2 5.0 10.1 14.5
Long term Incentives 6.3 13.3 27.9 35.2
100.0 100.0 100.0 100.0
Senior Executive Fixed Pay 87.4 80.1 66.4 65.9
Short Term Incentives 6.1 4.3 10.4 14.2
Long term Incentives 6.5 15.6 23.2 19.8
100.0 100.0 100.0 100.0
Executive Fixed Pay 91.1 79.2 72.6 67.7
Short Term Incentives 3.0 7.2 9.3 13.6
Long term Incentives 6.0 13.6 18.1 18.7
100.0 100.0 100.0 100.0
Source: O’Neill, G. (1999b), Executive Remuneration in Australia: An Overview of Trends and Issues, Australian
Human Resource Management Institute/Hay Consulting Group, Sydney.
Exhibit 1.6
Average Value of Shares and Options Held By Executives in the Largest Listed Companies,
Australia, 1999-2002
Largest 150
Positions
Largest 100
Positions
Largest 50
Positions
Largest 20
Positions
$AU million
Value of Shares Held+
1999-2000 N/A 190.91 363.57 771.11
2000-2001 133.92 190.18 321.73 773.70
2001-2002 108.65 159.67 272.60 316.16
Change 1999-2002 N/A (-16.36%) (-25.02%) (-58.99%)
Gross Value of Options Held++
1999-2000 N/A 14.89 24.98 53.39
2000-2001 9.15 9.91 16.69 31.17
2001-2002 8.53 11.90 20.34 39.84
Change 1999-2002 N/A (-20.08%) (-18.57%) (-25.38%)
# By market capitalisation, excluding property and other trusts.
+ Total share ownership as disclosed in most recent annual report multiplied by company’s closing share price at end
of year.
++ Total number of options held as disclosed in most recent annual report multiplied by company closing share price at
start of year.
Source: AFR, 1 November 1999, 16 November 2000, 16 November 2001, 6 November 2002.
Exhibit 1.7 details the composition of the employment-related income, equity wealth and possible
future equity-related wealth of the twenty most highly paid Australian executives. As the data
shows, in most cases the estimated value of shares and share options held far outstripped the level
of total annual cash remuneration. High earnings from option plans have ceased to be seen by top
executives as an optional extra; they have come to be seen as a job entitlement.
Nevertheless, the gross value figures do signify the orders of magnitude of the potential
wealth involved and enable meaningful comparisons between CEO positions.

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Exhibit 1.7
Components of Remuneration of the Twenty Highest Paid* Executives, Australia, 2001-2
CEO Company
Base
Salary,
Super &
Benefits
Bonuses
& Other
Incentives
Total
Annual
Cash Rem.
Value of
Shares
Owned+
Gross
Value of
Options
Held++
$AU million
1. P Chernin News Corporation 14.68 16.97 31.69 0 215.62
2. R Murdoch News Corporation 10.98 5.31 16.29 6,206.30 232.37
3. P M Anderson BHP-Billiton 10.53# 3.51 14.04 18.62 0
4. F P Lowy Westfield Holdings 0.98 10.94 11.92 2,373.19 0
5. W M King Leighton Holdings 2.19 6.85~ 9.04 0.069 6.75
6. M A Chaney Wesfarmers 1.22 6.71 7.94 10.95 0
7. D M Murray Commonwealth Bank 1.68 5.32~ 7.00 3.50 57.63
8. D Eck (retired) Coles Myer 5.46 0 5.46 0 0
9. A E Moss Macquarie Bank 0.65 4.19 4.83 9.50 10.30
10. T J Degnan Burns Philp 3.17 0.72 3.89 1.17 0.45
11. P J Smedley Mayne Group 2.10 1.75 3.85 0 7.26
12. R L Clifford Rio Tinto 2.70 1.08 3.79 0 0
13. P S Lowy Westfield Holdings 1.50 2.21 3.72 2,373.19 18.70
14. J Strong Qantas 3.65 0 3.65 0 0
15. D H Randall Aristocrat Leisure 1.30 2.35 3.65 1.62 8.56
16. R Wilson Rio Tinto 2.15 1.43# 3.59 3.77 22.61
17. P Kirby CSR 1.51 2.00 3.51 6.93 4.31
18. I R Wilson Tabcorp Holdings 2.37 0.98 3.35 46.58 37.50
19. P Batchelor AMP 1.73 1.61 3.34 1.63 23.13
20. C K Chow Brambles Industries 2.75 0.54 3.29 0 16.83
Average 3.67 3.73 7.39 552.80 33.10
* Based on total annual cash remuneration
+ Total share ownership as disclosed in most recent annual report multiplied by company’s closing share price at end
of year.
++ Total number of options held as disclosed in most recent annual report multiplied by company closing share price at
start of year.
~ Includes deferred cash incentive payment.
# Includes retirement/termination payment.
Source: AFR 6 November 2002.
Since the end of the 1990s share price boom, executive option plans have certainly lost some of
their appeal to executives and company boards alike. The general downturn in share price has
reduced the potential value of equity-based incentive plans. The share price has made many
executive share options worthless. Several of the most highly paid Australian executives (for
example, David Murray of the Commonwealth Bank) also appear to have had a change of heart
about executive option plans. There are indications that Australian executives, like their US
counterparts, are becoming less enamoured of long-term incentives and are beginning to demand a
greater emphasis on more immediate rewards, particularly in the form of cash payments and share
bonuses, to offset the lower returns currently available via options.
At the same time, the absence of down-side risk to executives, the lack of transparency in option
grants, and the refusal by many companies to properly cost (’expense’) executive options has
aroused considerable anger among individual and institutional shareholders. C+BUS, one of
Australia’s largest industry superannuation funds, has decided to use its voting rights to oppose all
proposals for further option grants by companies in which it invests (Cameron, 2002, 19).
Shareholder pressure and closer media scrutiny have forced some company boards to reconsider the

7
practice. Over the past few years, it has become common for company boards to apply various
performance hurdles to option entitlements (a point taken up in more detail in chapter 3). Moreover,
some leading companies, including the Commonwealth Bank, Telstra, AMP, Western Mining
Corporation and Qantas, option schemes have recently suspended further issues of executive
options (Murray, 2002, p.49).
1.3 Golden Handshakes: Rewards for Executive Failure
One of the most controversial aspects of current executive remuneration practice is the provision of
large termination payments to departing senior executives. The Australian corporate landscape is
littered with examples of failed executives being paid multi-million dollar payouts to ease the pain
of separation following poor performance. Exhibit 1.8 details termination payments made to some
prominent Australian executives over the past 5 years by company boards. In many cases, these so-
called ‘golden handshakes’ dwarf the levels of annual cash remuneration paid to such executives. In
1999 AMP paid departing CEO George Trumbull $AU13 million to smooth his exit following the
company’s disastrous takeover of GIO. Five senior executives and directors who left AMP in 2002,
and who were responsible for one of Australia’s largest-ever corporate losses, walked away with
over $AU12 million in exit payments (Sydney Morning Herald, 27 February 2003, 33). Sacked
Southcorp CEO Keith Lambert received a $AU4.4 million termination payment despite the
company’s shares losing 40 percent of their value during his 19-month tenure. Lambert, who had
18 months of his three year contract still to run, received $AU2.95 million in severance pay and
$AU1.43 million in line with a non-complete clause in his contract (Australian, 26 February, 2002,
3). When Colonial First State CEO Peter Smedley left in 2000, he took $AU20 million in shares
plus an annual pension of $AU837,000 payable not until his death but until that of his spouse
(Sydney Morning Herald, 15-16 February, 32).
Exhibit 1.8
Termination Payments to Selected Australian Executives, 1998-2003.
Executive Company Termination Payment
($AU million)
Year of Payment
C Cuffe Colonial First State 32.5 2003
B Gilbertson BHP Billiton 24.0 2003
P Smedley Colonial First State 20.0 2000
P M Anderson BHP Billiton 17.0 2002
S Jones Suncorp Metway 16.0 2002
S Presser Lend Lease 15.0
G Trumbull AMP 13.2 1999
J Prescott BHP 11.0 1998
T Park Southcorp 10.0 2001
R. Wilson Tabcorp 9.2
D Eck Coles Meyer 8.6
J E Fletcher Brambles 7.7 2001
K Lambert Southcorp 4.4 2003
P Batchelor AMP 1.4* 2003
* Batchelor has reportedly been expecting/demanding a payout of $AU18 million.
Sources: Australian Financial Review, 6 November 2002, S6; Business Review Weekly, 20-26 February 2003, 49;
Sydney Morning Herald, 15-16 February 2003, 25, 14 March 2003, 1; Australian 26 February 2003, p.3.
Various justifications are offered for such stratospheric and frequently hidden payments. Defenders
of the practice argue that they represent special recognition for good/long service and provide an
incentive for the departing executive to do so ‘quietly’ and not disclose corporate information to
competitors. To critics, however, such payments amount to rewards for executive failure, an
exercise in boardroom featherbedding, and an abrogation of corporate responsibility. According to
Dr Simon Longstaff, from the St George Ethics Centre:

8
“There is a failure of moral courage of some Boards…They will agree among themselves
that they shouldn’t do it, but they still move with the market.” (Sydney Morning Herald, 15-
16 February 2003, 25).
Some departing executives, such as AMP ex-CEO Peter Batchelor, have clearly come to see a
multi-million dollar severance payment as an entitlement. However, media, political and public
outcry about the sums being demanded by ex-CEOs like Batchelor has forced company boards to
rethink and, as in Batchelor’s case, to radically reduce the level of the termination pay-out (Sydney
Morning Herald, 14 March 2003, 1).
The nature and magnitude of these exit payments raise serious questions about corporate
governance. Quite apart from the issue of pay equity, the phenomenon highlights a fundamental
lack of procedural transparency. Few companies have mechanisms in place to calculate final
payouts to departing executives and those that do, ‘feel no need to disclose the scale of termination
rewards awaiting their top tier of management’. Boards appear to believe that where termination
payments are incorporated in executive contracts, they are subject to confidentiality and that
“shareholders should only be informed of these afterwards” (Weekend Australian, 26-27 October
2002, 34).
1.4 Middle of the Pack: International Comparisons
While Australia executive remuneration levels remain below the levels reached in countries like the
USA, they are being influenced increasingly by international trends. This section explores points of
similarity and difference between Australian and international practice in CEO remuneration, with
special reference to comparisons with the USA and UK.
The rate of growth of top CEO remuneration in Australian over the past decade has been very
similar to that in the USA. In each case, the increase has been of the order of 400 percent. Each
April, the magazine Business Week publishes a survey of the total remuneration of the most highly
paid US CEOs. Compiled using the Standard and Poor’s ExecuComp database, the Business Week
survey covers remuneration for the top 365 US CEOs. The total pay figures include income from
base salary, bonuses, ‘other compensation’, restricted stock awards, long-term incentive payouts,
and the value realised from options exercised during year. The Business Week data (see Exhibit 1.9)
reveals that between 1990 and 1995, the average total remuneration of the CEOs of these
companies soared by 92 percent, from $US1.95 million to $US3.75 million. In 1996 alone, top
CEO pay rose by an unprecedented 54 percent, to an average of $US5.8 million. In 1997 it rose a
further 35 percent, to $7.8 million. In 1998 it rose a further 36 percent to $10.6 million. The
ensuing two years brought something of a slow-down. In 1999 the average annual increase was 13
percent; in 2000, 7 percent. Since the end of the dot.com share boom, the average has actually
declined. In 2001, the average fell by 16 percent; in 2002, it fell by 33 percent, with the decline
being driven mainly by a reduction in earnings from long-term incentive plans as the option grants
made in the last years of the bear market slip further ‘underwater’. As a result, average top CEO
pay in the USA is back to where it was in 1997. However, as Business Week cautions, ‘averages
can be deceptive’. While the average exec pay plunged by a third in 2002, the median pay of our
365 CEOs actually rose by 5.9%, to $3.7 million (Business Week, 21 April 2003). So, despite a
scaling back of some of the most gargantuan pay packages, underlying growth continues, albeit at a
more restrained pace.
3
3
Based on the experience of the 1990s, it is probable that Australian CEOs will experience a
similar, albeit lagged trend involving a shake-out at the top, coupled with continued (though
more modest) growth in the middle of the range.

9
As in Australia, the increase in top US CEO pay has far outpaced growth in ordinary worker
earnings - in each case by a factor of ten. Between 1990 and 2001, when top US CEO pay surged
by almost 500 percent, average US worker pay rose by just 42 percent (Klinger et al, 2002, 14).
The effect has been to dramatically widen the pay gap between CEOs and ordinary employees. As
the Exhibit 1.9 data shows, in 1980, average top CEO pay was 42 times that of the ordinary factory
worker. By 1990, the ratio had doubled to 85 times average factory workers’ wages. By 1996,
CEOs made 209 times the average factory worker’s pay. In 1997 they made 326 times more. In
1998, they made 419 times more. By 2000, the difference was over 500 percent. Since then, the gap
has halved, but this still leaves the level of inequality far above that which applied at the beginning
of the 1990s.
Exhibit 1.9
Growth of Average Remuneration of the Most Highly Paid US CEOs#, 1990-2002
Year Av. Total Pay*
($US million)
% Increase
1990 1.95
1995 3.75
1996 5.80 +54
1997 7.80 +35
1998 10.60 +36
1999 12.40 +17
2000 13.10 +6
2001 11.00 -16
2002 7.40 -33
# n=c.365.
* Annual gross cash income from base salary, bonuses, ‘other compensation’, restricted stock awards, long-term
incentive payouts, and the value realised from options exercised during year.
Source: Business Week annual executive compensation survey data; Klinger et al, 2002, 14.
Exhibit 1.10
Ratio of Average Top CEO Pay To Average Blue Collar Employee Pay, USA, 1980-2001
1980 42 times
1990 85 times
2000 531 times
2001 411 times
2002 200 times
Source: Business Week annual executive compensation survey data, as reported in Klinger et al, 2002,1 & 15-16.
While Australia has experienced a similar growth in the absolute and relative levels of executive
pay, on average, Australian CEOs occupy a middle-range position relative to counterparts in major
western countries. In terms of the cash component, Australian CEO pay is only about half that in
the USA (see Exhibit 1.11). It was also slightly lower than average rates in the UK. Yet the
Australian average is above that for Japan (where long-term incentives are little used) and France,
and well above that for Sweden and Germany.
However, in terms of total remuneration, inclusive of options and other long-term incentives,
Australian CEOs lag some way behind their UK and US counterparts. Comparative data produced
by global remuneration consulting firm William Mercer (see Exhibit 1.12) suggests that average
total remuneration of Australian CEOs is around one quarter that of UK CEOs and approximately
one-fifth that of US CEOs. There are many reasons for these differences. One has to do with the
smaller size of the largest Australian companies compared to, say, the Fortune 500 firms in the
USA. Another contributing factor is the fact that short- and long-term incentives continue to
comprise a smaller proportion of Australian CEO remuneration than is the case in the UK and
USA. As the Mercer data suggests, compared to the UK an the USA, base salary constitutes a
higher proportion of Australian CEO total remuneration, and incentives, particularly long-term

10
incentives, constitute a significantly smaller proportion. In the USA, incentives comprise 70
percent of average total CEO remuneration; in the UK, 58 percent; in Australia, 48 percent.
Exhibit 1.11
International CEO Cash Remuneration, 2000-2001.
Country Average Annual Pay*
($AU million)
USA 2.7
Britain 1.4
Australia 1.3
Japan 1.1
France 1.0
Sweden 0.8
Germany 0.8
* Includes bonuses and income from exercised options.
Source: Sydney Morning Herald, 20 August 2001.
Exhibit 1.12
Comparative Size and Composition of Average Total CEO Remuneration: Australia, United
Kingdom and the USA, 2002
Australia United Kingdom USA
Salary 52% 42% 30%
Short Term Incentives 17% 19% 24%
Long Term Incentives 31% 39% 46%
Av. Total Remuneration
(Australia = 1.00)
1 3.82 4.85
Source: Cornish, G. (2003), ‘CEO/Senior Executive Reward, Performance and Benefits: What’s Happening?’, William
Mercer, http://www.ceoforum.com.au/200108_remuneration.cfm
The Business Week data illustrates graphically the centrality of long-term incentive earnings to the
stratospheric levels of total remuneration received by top US CEOs down to 2001. Exhibit 1.13
provides a breakdown of the total remuneration of the 20 most highly paid US CEOs for 2001. On
average, income from long-term incentives was 20 times that derived from base salary and cash
bonuses: $US104.8 million compared to $US5.4 million. Despite the beginnings of the retreat from
option plans, and the substantial fall in average top CEO pay in 2002, the 20 most highly paid US
CEOs for 2002 still derived 14 times as much income from long-term incentives as from base
salary and bonuses: $48.5 million compared to $US3.5 million (Business Week, 21 April 2003).
Legislation designed to limit the growth in US CEO pay may have unwittingly contributed to the
greater accent on option-based wealth acquisition during the 1990s. In 1993, the Clinton
administration responded to a growing public furore over run-away executive pay by implementing
a series of legislative measures intended to rein in the growth. Cash payments to individual
executives in excess of $US1 million cannot be claimed by companies as tax deductions. However,
performance-related pay is exempted from this cap where the performance goals are explicit,
established by an independent compensation committee, and approved by shareholders. The overall
effect of the tax exemption limit has been quite perverse. While the intention was to rein in growth
in executive pay, the effect has been to encourage a move to non-cash incentives, particularly share
grants and share options. The move also lost the US government vast amounts of tax revenue.

11
Exhibit 1.13
Twenty Highest Paid US CEOs, 2001
CEO Company Salary & Bonus Long-term
Compensation*
Total
Remuneration
$US Million
1. L Ellison Oracle 0 706.1 706.1
2. J Straus JDS Uniphase 0.5 150.3 150.8
3. H Solomon Forest Laboratories 1.2 147.3 148.5
4. R Fairbank Capital One Finance 0 142.2 142.2
5. L Gerstner IBM 10.1 117.3 127.4
6. C Wang Computer Associates 1.0 118.1 119.1
7. R Fuld Lehman Brothers 4.8 100.4 105.2
8. J McDonald Scientifica Atlanta 2.1 84.7 86.8
9. S Jobs Apple Computer 43.5 40.5 84.0
10. T Koogle Yahoo 0.2 64.4 64.6
11. T White Applied Biosystems Group 1.7 60.2 61.9
12. D Rickey Applied Micro Circuits 0.9 58.6 59.5
13. J Gifford Maxim Integrated Products 0.3 57.7 58.0
14. P Folino Emulex 0.9 55.3 56.2
15. D Daft Coca-Cola 5.1 49.9 55.0
16. G Bible Philip Morris 5.6 44.3 49.9
17. M Devlin Rational Software 1.0 46.3 47.3
18. B Karatz KB Home 7.5 36.9 44.4
19. S Weill Citigroup 18.7 23.9 42.6
20. M Arison Carnival 2.2 38.3 40.5
Average 5.4 104.8 110.2
* Inc. value of exercised share options, restricted share bonuses, and other LTI payments received in year but excludes
value of unexercised option grants.
Source: Business Week, 15 April 2002.
1.5 Conclusions
While Australian executives are still well short of matching their US counterparts in the total
earnings stakes, the long-term trends have been very similar. In both countries, the 1990s witnessed
exponential increases in senior executive earnings, with overall growth averaging around 400
percent - or approximately 10 times the growth in ordinary worker earnings. The yawning pay gap
between senior executives and ordinary workers makes a mockery of the employer insistence on
wage restraint for the lowest paid workers and raises fundamental questions about both the social
justice and the organisational worth of the multimillion dollar payouts being made. There is little
evidence that the greater accent on share options and other long-term incentives has enhanced
shareholder value. Until recently, senior executives have been able to command pay rises far in
excess of improvements in key financial measures of organisational performance. Many have also
received stratospheric termination payments when, on the basis of traditional accounting measures,
they have clearly not performed. The end of the share price boom may have ended the worst
excesses of unrestricted option plans and persuaded executives and company boards alike to rethink
their approach to top executive pay but it remains to be seen whether the interests of other
stakeholders will be taken into account in the process of reconfiguring executive remuneration
levels and composition.

12
CHAPTER 2
Rewarding Excellence or Reward Excess? Debates About Executive
Pay.
The growth in executive pay levels and the reliance on option plans as a form of executive reward
have aroused considerable debate in recent years. This chapter examines some of the main
arguments for and against these developments.
2.1 The Case For
Most justifications for the high and rising levels of executive total pay focus on one or more of the
following points:
1. The ‘size’ and short tenure of executive jobs.
2. The scarcity of executive talent.
3. The globalisation of executive labour markets.
4. The need to treat the executive as an ‘agent’ of the organisation’s shareholders.
Job Size and Short Tenure
Defenders of high executive pay argue that the high and (until recently) rising levels of executive
pay reflect the growing content and complexity of executive jobs. Three job factors are usually
singled out for special mention here: ‘risk’; ‘responsibility’; and organisational size. Top
management jobs are said to involve a far higher element of ‘risk’ than was previously the case.
There is more risk in terms of the vast sums of money now involved in strategic planning and
decision-making, and executives, it is argued, deserve to be compensated for shouldering that
greater risk. Then there is the greater degree of ‘responsibility’ in the job - responsibility for people,
resources, strategy, legal liability. Executive positions have a far wider span of responsibility,
control and discretion than other jobs and, so the argument goes, should be paid a lot more. The fact
that executives are now expected to be ‘change agents’ rather than just capable administrators has
transformed the nature of executive responsibility. At the same time, executive tenure itself is more
at risk. Appointments tend to be short term and continuity is far more performance dependent. CEO
jobs are no longer for life. Average tenure for CEOs in large companies appears to be between
three and five years. Why, though, should special compensation for limited tenure apply only to
executives and not to ordinary employees?
A related job factor is organisational size. There is certainly a strong correlation between the size of
the organisation and the size of the total executive pay packet. The bigger the organisation, the
bigger the job size and the greater degree of risk and responsibility involved. These ‘job’ content
factors would certainly justify a high level of base pay compared to that of ordinary employees. The
question is, how much more?
Scarcity of Executive Talent
A second justification for high executive pay has to do with the scarcity of top executive ability.
Not only is the total pool of talent available to fill top management posts relatively small; the
supply of leadership competencies and experience for particular types of organisations is even
scarcer. For example, the pool of individuals with the abilities and experience capable of leading a
major corporate turnaround or a multi-billion dollar corporate merger is extremely limited.
Attracting the right person for the job means paying premium prices. Could it be, however, that the
mantra of executive talent is little more than a self-serving myth - that senior executives command
so much organisational power that they are capable of generating their own labour market supply,

13
demand and, hence, price? If executive talent is the key to business success, why is it that the
corporate world is littered with the wreckage wrought by such supposedly exceptional individuals?
Labour Market Globalisation
A third line of argument points to the fact that the labour market for executive talent is now a global
phenomenon. If organisations are not prepared to pay at or above the high market rates applying in
countries like the USA, they will not be able to attract or retain the world’s best executive talent.
The message to the boardrooms is simple and direct: if you want you firm to be lead by monkeys,
then pay peanuts; if you want the best, then pay above market. Because Australia’s pool of top
managerial talent is supposedly so small, Australian companies have no choice but to fish in the big
pond - and use very attractive lures. The 1990s certainly brought an increase in the number of
imports amongst Australia’s corporate high flyers: Bob Joss at Westpac, George Trumbull at AMP,
Frank Blount at Telstra. What we have here, then, is a justification for high executive pay which
emphasises the irresistible nature of global competitive pressure. But how mobile are executives
and is there just one world-wide market for executive ‘talent’?
Agency Theory
Many economists contend that the shift from base salary to incentives is justifiable in terms of
Agency Theory. Agency Theory focuses on the distinction between owners and salaried managers.
In large organisations, individual owners - or ‘principals’ - are incapable of exercising day-to-day
control over organisational affairs. So they appoint salaried managers to act as their agents.
However, the interests of the owner-principals and the manager-agents are not identical . Managers
may well pursue activities which benefit themselves rather than the owners. For instance, in public
companies, salaried senior managers may focus on personal gain rather than on shareholder gains,
or on short-term goals which advantage themselves rather than on long-term goals which are more
likely to advantage shareholders. This is know as the principal-agent problem. To minimise this
problem, shareholders seek to negotiate executive contracts which minimise their loss of control
and protect the company’s competitive interests. One specific way to do this is to use pay methods
which align managers’ material interests more closely with those of ordinary shareholders. How?
By making as much managerial pay as possible contingent on organisational performance and
financial returns to the owners. This is undoubtedly one of the main reasons why organisations
have, in recent years, altered the balance in executive pay away from guaranteed base salary and
benefits and towards short-term and long-term incentives. The question is, how effective are such
incentive plans in aligning executive behaviour with shareholder interests? Moreover, who says
that the only legitimate stakeholder interests here are those of executives and shareholders?
2.2 The Case Against
Those who question current trends in executive pay generally point to one or more of the following
concerns:
1. Distributive injustice
2. Poor corporate governance
3. Non-disclosure and non-expensing
4. Market manipulation
5. Rent extraction
6. Dilution of shareholder value
Distributive Injustice
Many critics contrast the ‘top end’ payola with what has been happening to ordinary employees. In
an era of downsizing, slow wages growth, intensified workloads for those kept on, high executive
pay-outs are almost bound to leave ordinary employees feeling more than a little dissatisfied and,
perhaps, demotivated by perceptions of comparative pay inequity. Edmund Heery (1996) notes that

14
while the pay of ordinary employees is being put more and more at risk, the generous share
option plans which have come to characterise the variable component of executive salary packages
are virtually risk free.
Few companies have bothered to pay more than lip service to the notion of equality of effort or
sacrifice as they strive to make their organisations leaner, meaner and flatter. Whilst ordinary
employees are being asked to contribute more and more with little or no real increase in overall pay
levels, top management pay surges ever upwards. In some cases, it seems that highly paid CEOs are
almost oblivious to the hardships they are imposing on ordinary employees. Significantly, in the
USA during 1996, the CEOs of the companies with the largest announced layoffs experienced the
largest pay increase of all - an average of 67 percent. The more pain, the more gain - but not for the
same people! The decade of the 1990s witnessed a transfer of wealth from ordinary workers to
executives via a corporate focus on cost cutting via ‘downsizing’:
Almost every wave of retrenchments translated into accolades from analysts, share price
appreciation and hence greater rewards for the senior executives. (Cornell, 2002, 45)
Why should organisations be concerned about the issue of distributive justice within their pay
structures? Because perceptions of distributive injustice can reduce employee commitment,
increase turnover and compromise product an service quality. For instance, Cowherd and Levine
(1992) have found that the wider the size of the pay differential between lower-level employees and
senior managers, the greater the degree of lower-level dissonance and the lower the level of lower-
level commitment, co-operation, effort and attention to quality. Byrne & Bongiorno (1997) report
similar findings. The implication is that if senior management truly want employee commitment
and involvement, then the trend to wider pay inequality between senior management and ordinary
employees will have to be reversed:
Our findings indicate that product quality may be diminished when high wages for the
upper echelon are not matched by high wages for lower-level employees. Future studies of
executive pay should consider not only the effects of top managers’ pay on their own
motivation but also how executive pay levels affect the motivation of lower-level
employees (1992, 317).
So distributive justice is not just a matter of ‘fairness’ - it may also be an important determinant of
organisational performance.
What, then, are the requirements for achieving greater distributive justice? In setting executive pay
levels, company boards need to take into account the interests of other parties. As Carr and
Valinezhad (1994) argue, this includes not only the interests of shareholders but also those of
ordinary employees, customers and the general public. The interests of ordinary workers and
consumers stand to be vitally effected by any redistribution of corporate wealth to top management.
Poor Corporate Governance
The procedures by which executive pay is determined have also been drawn into question. If
company boards want ordinary employees and shareholders to believe that the pay of senior
executives is fair, then they have to ensure that the procedures by which executive pay is
determined are ‘seen to be fair’. However, critics like Bud Crystal argue that the procedures by
which CEO pay is determined have been anything but transparent and fair. Crystal (1988, 1991)
argues that many company boards are little more than rubber stamps when it comes to CEO pay.
He suggests that many boards of directors function like a closed club, with CEOs serving on each
others’ boards and approving each others’ pay packages. In the USA in the early 1990s, it was
standard practice for executive remuneration levels to be set by remuneration committees
comprised of half a dozen or so non-executive or honorary directors. And who was it who usually

15
recommended the level of fees or honorariums to be paid to such directors? It was the CEO, who
was often also the board chairperson. So the board of directors determined the pay of the CEO, and
for all practical purposes, the CEO determined the pay of the board of directors.
4
A related problem is the fact that many members of company boards are there at the behest of large
institutional investors, such as banks, insurance companies and superannuation funds, the CEOs of
which have a vested interest in maintaining high levels of executive pay. This is certainly a problem
in Australia, where interlocking boards are very common. While there is as yet no formal
requirement for Australian listed companies to establish remuneration committees (O’Neill, 1999b,
n.p.), shareholder pressure and advocacy by bodies such as the Australian Institute of Company
Directors has resulted in the practice being more widely adopted. Since the mid-1990s, there has
been a significant increase in the proportion of Australian companies making use of specially
constituted remuneration committees to determine executive remuneration levels and composition.
5
However, it is still rare for these committees to be fully independent from the executives
themselves.
Crystal also points to the role of obliging remuneration consultants in pushing executive salaries
ever higher. Because they depend for their livelihood on business thrown their way by senior
managers, consultants are not predisposed to question executive pay levels:
bucking a CEO and telling him that he ought to cut his bloated pay package can potentially
cost a consulting firm not only the loss of executive compensation revenues but the loss of
much larger revenues being generated from other services …. The problem here is that the
consultant is ostensibly being hired by a company’s shareholders to give his/her best advice,
but is actually being hired by the CEO. And the CEO’s interests are not always those of the
shareholders. (Crystal, 1991, 13)
Crystal also highlights the corporate pride factor. There is a tendency to pay CEOs above the
market average because it is thought that paying any less would be seen as an admission of
corporate failure. This gives rise to what Crystal refers to (1991, 14) as ‘survey ratcheting’. The
more companies who pay above the existing market average, the higher the future average will be.
In 1988, Crystal published a now classic statistical analysis of the determinants of executive pay in
170 of the USA’s biggest companies which compared the actual levels of total CEO pay with a
notionally ‘rational’ level of remuneration based on a number of variables widely held to be
legitimate determinants of senior management pay levels: company size, firm performance, level of
business risk, location, CEO age, the amount of company stock held by the CEO, and the like.
Crystal found that, in most cases, these firms paid above a ‘rational’ level and that only 39 percent
of the variation was attributable to his so-called ‘rational’ factors. The remainder - 61 percent - he
attributed to non-rational decision-making at board level (Crystal, 1988, 35-36).
These concerns have produced a series of initiatives designed to ensure greater objectivity and
transparency in executive pay determination procedures. In the USA and the UK this has included
the creation of remuneration committees which are either largely of fully independent from
4
Crystal’s criticisms were first advanced in the early 1990s, prior to the introduction of
legislation by the Clinton administration requiring US compensation committees to be
constituted in manner detached from direct CEO influence. Just how effective this initiative
has been is a moot point.
5
It has been reported that the proportion of major Australian companies using remuneration
committees rose from 47 percent in 1995 to 66 percent just two years later (Cornish, 1998).

16
executive influence, and moves to compel companies either in law or via stock exchange listing
rules to disclose in detail the pay packages of senior executives (O’Neill, 1999b, n.p).
Non-Disclosure and Non-Expensing
In Australia, disclosure provisions were introduced for the first time in 1995 and the current
provisions are those specified in the Company Law Review Act, 1998. Under Section 300A of the
Corporations Law, the annual Director’s Reports of listed companies are required to include:
1. A discussion of the ‘broad policy’ for determining the nature and extend of executive and
directors remuneration;
2. A discussion of the relationship between that policy and company performance; and
3. Details of the nature and extent of each element of the remuneration for each board member,
and the five highest remunerated executives.
Schedule 5 of the Corporations Regulations requires public companies to list total cash and non-
cash remuneration received by or due to executives in bands of $10,000 commencing at $100,000.
Companies are not required to identify individual executives, only the number of executives in each
$10,000 band (O’Neill, 1999a, 165-166).
However, there is clear evidence that the spirit of these innocuous disclosure provisions is being
widely flouted. As a consequence, ordinary shareholders are being kept in the dark. In 2002,
accounting firm Ernst and Young found that only 12 percent of Australian companies surveyed
believed that it was important to consult shareholders at all on remuneration issues (Hovy, 2003,
36). In earlier study of the top 100 Australian companies, the same firm found clear evidence of
deficient and inconsistent disclosure, especially in relation to options. Companies were disclosing
the number of options granted but not the estimated dollar value (O’Neill, 1999b, n.p.). A
University of Melbourne survey of 2000-1 financial reports found that while almost half of the 100
largest Australian companies had offered option packages to executives and directors, only one in
four had disclosed their estimated financial value (Sydney Morning Herald, 21 August, 2002, 2).
6
The 1998 provisions do not require companies to include options as an income generating expense
(i.e. to ‘expense’ options against profits). One of the attractions which options have to company
boards is that, unlike salary or cash bonuses, they do not (yet) have to be recorded as an expense
against annual income. As critics such as Bodie et al (2003) argue, however, share grants do have
real cash-flow implications. This includes the opportunity-costs associated with the foregoing of
alternative cash-flow possibilities, such as receiving cash from underwriters who could take the
options and sell them to investors in the competitive options market (Bodie et al, 2003, 64). Such
costs are real and could and should be reported. A US Federal Reserve study found that if options
had been expensed in the period 1995-2000, annual corporate earnings would have been just 5
percent rather than the 8.3 percent reported. A Merrill Lynch study estimated that if options were
expensed, earnings for US Standard and Poors 500 firms would have been 21 percent lower in
2001, and 10 percent lower in 2002. In the option-crazed information technology industry,
expensing would have slashed reported earnings by 39 percent in 2001 and 70 pecent in 2002
(Klinger et al, 2002, 9). Investment bank JP Morgan suggests that expensing of options would have
reduced the overall net profits of top Australian companies by up to 2 percent. In some cases, the
impact on the corporate bottom line would have been dramatic. Cochlear would have lost 56
percent if executive options had been expensed; CSL 21 percent; Newscorp 14.8 percent; AMP 3.7
percent; NAB estimates that expensing would have reduced its 2000-1 result by $44 million
(Weekend Australian, 24-25 August 2002, 36). In the absence of proper expensing, it is next to
6
Major companies not costing options included: AXA, BHP Billiton, Billabong, Brambles,
CBA, CSL, Harvey Norman, NAB, Orica, South Corp, Tabcorp and Woolworths.

17
impossible for shareholders and potential investors to gauge accurately the underlying financial
performance of companies with generous executive option plans.
Options can involve substantial indirect costs to both the organisation and its ordinary shareholders.
Three is no such thing as a ‘free’ share - somewhere, sometime, someone pays. The main sticking
point here is that there is no agreed way of measuring the ‘true’ cost of options to the organisation.
Until recently, companies simply pretended that option plans were cost neutral and made no
provision for them in their annual accounts. Since 1996 US firms have been required to disclose the
estimated cost of share option grants made during the year using one of two means of option
pricing - 5 percent annual appreciation or the Black-Scholes method. There is as yet no formal
requirement for Australian companies to expense options.
A related concern with executive options is the potential encouragement of dual accounting
practices. As Klinger et al (2002, 8) report, this is a major problem in the USA:
The cost of stock options does not appear on the accounting statements that companies
show to shareholders, but these same options appear prominently on the different set of
books that companies show Uncle Sam and the IRS. On the companies’ tax books,
companies take the gain on options, pocketed by the CEOs and others, as valuable tax
deductions. Lower taxes translate into higher earnings per share and in most cases, higher
stock prices, leading to still further option gains, more tax deductions and still higher
earnings, in a spiraling cycle of earnings deception.
According to one estimate, exercised options may have reduced corporate taxes for US companies
by as much as $US56 billion in 2000 (Klinger et al, 2002, 8). While this issue has been little
researched in Australia, circumstantial evidence, including the extremely low level of corporate tax
actually paid by large Australian companies, points to the existence of double bookkeeping
practices here as well.
Market Manipulation
This can be a problem with both short term incentives and option plans. Executives can easily use
their position to manipulate market place perceptions to their advantage. As we have seen, bonuses
linked to annual financial results invite understatement of costs and overstatement of income. With
options, the temptation to engage in market manipulation is two-fold: first, to release pessimistic
information (e.g poor profit projections) which depresses the company share price just before the
granting of an option; secondly, to release optimistic information (e.g. strong profit projections) in
the run-up to an option entitlement reaching maturity. A study five year study of 570 US firms with
executive option plans in place by David Aboody and Ron Kasznik of the Stanford Business
School found that the pattern of share price movements, forecast revisions, and earnings forecasts
around the time of option grants differed significantly from other times. They also found that before
the grant date executives were more likely to disclose bad news and that they tended to withhold
positive news until after the option grant date. Such actions, of course, amount to ‘creative
accounting’ and book-cooking. Beyond a point, they are also tantamount to insider trading.
Rent Extraction
Researchers Bebchuk, Fried and Walker (2002) have challenged the validity of pay practices aimed
at harmonising executive and shareholder interests (and, hence, at striking an optimal principal-
agent bargain) by arguing that executive behaviour is essentially an exercise in ‘rent-extraction’.
Far from acting in shareholders’ interests, and far from executive pay being the determined by

18
arms-length bargaining, executives use the power of their positions to extract an ‘economic
rent’
7
, chiefly by influencing their own remuneration packages. The issue here is one of
‘asymmetric information’ - the ‘agent’ has greater knowledge and hence power than does the
principal. As a result, they are paid more than is required to hold them in the job and to optimise
shareholder returns. As such, executive incentive plans that purport to advance shareholders
interests may be little more than devices to camouflage this wealth appropriation.
Dilution of Shareholder Value
When an executive disposes of exercised share options to make a capital gain, the sudden flood of
additional shares onto the market is likely to have a downward effect on the company’s share price.
Some estimates put this ‘dilution’ effect as high as 10 percent. One the other hand, Cook (1998)
argues that the dilution impact is much less than claimed, since share options dilute only earnings
per share, not net earnings overall. One way for firms to minimise dilution is to engage in a share
buyback in the general share market, which may boost share value and keep ordinary shareholders
content. Steps can also be taken to minimise the risk of dilution by placing a cap on the use of
executive share plans or by staggering exercise dates.
2.3 Conclusions
There may well be compelling arguments for relating the level of executive base pay to the ‘size’ of
the organisation and the role. The tenets of Agency Theory also suggest the potential worth of
configuring executive pay level and composition so as to link it more strongly to returns to ordinary
shareholders. Moreover, while the mantra of a global scarcity of executive ‘talent’ may be a self-
serving myth, no organisation to afford to ignore completely the forces of external labour markets.
Yet there are also solid grounds for questioning current executive pay practice in Australian
companies. The widening pay gap raises many problems relating to distributive injustice; problems
which actually stand to impair both employee satisfaction and organisational performance. There
are also shortcomings relating to corporate governance and the absence of transparency and
disclosure. There are other concerns too: the failure to expense options, the potential for market
manipulation and unethical behaviour, especially in relation to the use of financial performance
hurdles, the abuse of executive power for self-serving ends, and the potential for options to dilute
ordinary shareholder wealth. Such concerns raise serious questions about whether or not
organisations and their shareholders are really getting value for money from the income and wealth
that they lavish on their senior executives.
7
Economic rent is the income an individual receives in excess of the amount that would be
needed to retain them in the position.

19
CHAPTER 3
The Missing Link: Executive Pay and Organisational Performance
What evidence is there that executive remuneration practices, and, in particular, executive
incentives, are effective in translating executive potential into improved organisational
performance? Research in the USA and the UK indicates that the link between executive
remuneration and organisational performance is either weak or non-existent. Weinberg (1995)
correlated CEO annual bonuses to operating income as a percentage of revenue for some 400 firms
and concluded that there was no significant link between company performance and bonus size.
Mishra, McConaughty and Gobeli (2000) report that the benefits of executive incentives are limited
by CEO risk aversion. When too high a proportion of CEO remuneration is at risk, firm
performance suffers. A recent US meta-analysis of more then 200 studies over 30 years found no
statistical relationship between the amount of equity executives own and their company’s
performance (Klinger et al, 2002, 9). A Columbia Business School study of 600 US companies
over 20 years found that increasing an executive’s stake in the company did not produce stronger
earnings or higher share price growth; rather high performance appeared to be driven by factors
such as the level of research spending (Klinger et al, 2002, 9).
Key economic indicators also point to a disconnect between executive pay and organisational
performance. As we have seen (Exhibits 1.2 and 1.3), over the past decade the average cash
remuneration of top Australian CEOs has grown at twice the rate of increase in share prices for the
top 200 Australian companies. Likewise, between 1990 and 2001, when top US CEO pay grew by
almost 500 percent, US share prices (as measured by the Standard and Poors 500 index) rose by
248 percent and US corporate profits by just 88 percent. As we have seen, over this period US CEO
pay growth also outstripped that of ordinary worker by a factor of ten. According to the US
magazine Business Week, there is no consistent correlation between the size of the total pay
package and returns to shareholders and the organisation. In many cases, US CEOs on high
packages have presided over mediocre results, while others on relatively low packages have
evidently delivered quite impressive organisational outcomes. The implication is that executives are
gaining at the expense of other organisational stakeholders, particularly employees and ordinary
shareholders.
These arguments have not gone unchallenged. For instance, Kay and Robinson (1994, 26) criticise
Business Week for failing to track the longitudinal link between executive pay and organisational
performance: ‘as profits and stock prices go up, compensation also goes up. When profits and stock
prices decrease, compensation generally follows the downward trend’ (Kay and Robinson, 1994,
26). Kay and Robinson (1994, 26) also contend that rather than measuring performance in terms of
percentage returns to shareholders, attention should focus on the total dollars created for
shareholders during the CEO’s tenure. In defence of the proposition that executive share ownership
does create meaningful gains in shareholder value, Kay cites a study of 261 US CEOs which
reveals that CEOs in the highest performing companies owned twice as much company stock as
CEOs in lower performing companies (Kay, 1999, 32-33). Significantly, Kay draws a strong
distinction between share ownership and share options, with the latter being seen as an inherently
inferior means of linking shareholder and executive interests.
8
8
Earlier US studies, including those by Gerhart and Milkovich (1990) and Leonard (1990)
suggest a positive association between executive incentives and firm performance, although
it should be noted that the evidence on which these studies are based predates the
ascendancy of options over the last decade. Indeed, it is noteworthy that few exponents of
executive incentive plans have been able to produce credible evidence of a positive link
between option grants per se and organisational performance.

20
What does the Australian evidence indicate? This chapter provides a quantitative analysis of the
strength and direction of the relationship between executive pay and organisational performance in
Australian firms. While some use is made of evidence and findings produced by other researchers,
the assessment draws mainly on the 1999-2002 Australian Financial Review data on executive
remuneration and organisational performance in Australia’s largest listed companies.
9
3.1 Perverse Incentives: Less for More and More for Less
For each executive in the annual Australian Financial Review executive surveys, the data identifies
six remuneration dimensions and four measures of organisational performance. The six main
remuneration variables are:
1. Base salary, superannuation and benefits.
2. Bonuses and other cash incentives.
3. Total cash remuneration: The sum of 1 & 2.
4. Percentage change in total cash remuneration compared to the figure for the previous year.
5. Market value of shares in the company held by the executive: the number of shares multiplied
by the company’s closing share price at the end of the relevant financial year.
6. Gross value of unexercised options held: the number of unexercised options held multiplied by
the company’s closing share price at the conclusion of the prior financial year.
The four measures of organisational performance used in the data set are:
1. Market capitalisation.
10
2. Return on equity (ROE): Profit, net of significant items, expressed as a percentage of
shareholders’ equity.
11
3. Share price change: The percentage change in the company’s share price over the course of the
relevant financial year.
4. Earnings per share change: Diluted earnings per share, as stated in the most recent annual
report, expressed as a percentage of the comparable figure for the prior year .
The nature of the data set permits both descriptive and inferential (correlation, regression) analyses
of the statistical relationship between these reward and performance variables.
Exhibit 3.1 presents descriptive statistics comparing means/averages on a range of the above
variables for the 20 best and 20 worst performing executives on each of three performance
measures (ROE, share price change, and change in earnings per share) for the years 2000-2001 and
2002-2002. On all three measures, the results support the conclusion that less delivers more; that is,
all other things being equal, more modest levels of cash remuneration and potential and realised
equity wealth are associated with higher levels of organisational performance. In Exhibit 3.1 the
data supporting this conclusion is highlighted in bold font. For ROE this conclusion applies across
all remuneration variables. In relation to share price change it holds for all variables except value of
share and option holdings for 2000-2001 and annual change in total cash remuneration for 2001-
9
The remuneration data is compiled chiefly from information provided in the latest company
annual, while company performance data is based on market calculations plus information
supplied by financial information services firm Bloomberg.
10
This is really a proxy measure for organisational size rather than performance per se and is
regarded as such in this study.
11
ROE data sourced from Bloomberg financial services.

21
2002. In relation to annual change in earnings per share the only significant exception is market
value of shares held in 2001-2002.
Exhibit 3.1
Executive Pay and Organisational Performance: Comparison of 20 Top and 20 Bottom Performers*,
Australia 2000-2002
Return on Equity
20 Best (Mean) 20 Worst (Mean)
2000-2001 2001-2002 2000-2001 2001-2002
Return on Equity 316.3% 50.3% -129.4 -33.3%
Base Salary, Super & Benefits
$564,209 $776,667 $1,191,356 $2,091,482
Bonuses and Other Incentives
$242,099 $394,684 $698,143 $1,195,084
Total Cash Remuneration
$826,308 $1,171,351 $2,106,559 $3,287,375
Annual Change in Total Cash
Remuneration
+6.2% +40.2% +30.0% +84.6%
Market Value of Shares Held in
Organisation+
$35,875,514 $13,051,899 $554,482,760 $310,946,505
Gross Value of Options Held++
$2,098,722 $4,855,299 $16,230,808 $23,233,813
Market Capitalisation $1,427 million $1,633 million $4,184 million $6206 million
Share Price Change (percent)
20 Best (Mean) 20 Worst (Mean)
2000-2001 2001-2002 2000-2001 2001-2002
Annual Change in Share Price +169.0 +87.2% -43.7 -64.6%
Base Salary, Super & Benefits
$655,947 $697,799 $1,022,782 $1,894,432
Bonuses and Other Incentives
$241,545 $149,942 $489,410 $1,188,737
Total Cash Remuneration
$899,442 $846,741 $1,512,193 $3,083,169
Annual Change in Total Cash
Remuneration
+7.0
+55.3%
+51.4%
+10.3%
Market Value of Shares Held in
Organisation+
$16,843,077
$19,799,200
$14,169,693
$323,353,168
Gross Value of Options Held++ $5,786,991
$1,550,900
$1,207,754
$24,072,401
Market Capitalisation $2009 million $1,386 million 1,308 million $6,183 million
Change in Earnings Per Share (percent)
20 Best (Mean) 20 Worst (Mean)
2000-2001 2001-2002 2000-2001 2001-2002
Annual Change in Diluted
Earnings Per Share
+335.9% 288.9% -125.9 -86.2%
Base Salary, Super & Benefits
$773,190
$929,891
$2,043,580
$888,494
Bonuses and Other Incentives
$232,373 $151,385 $1,512,960 $423,103
Total Cash Remuneration
$1,006,013 $1,081,276 $3,556,550 $1,311,597
Annual Change in Total Cash
Remuneration
+1.4
+5.3%
+0.5
+26.6%
Market Value of Shares Held in
Organisation+
$10,050,300
$42,511,783
$576,162,582
$2,817,181
Gross Value of Options Held++
$3,638,860 $3,638,150 $29,085,092 $7,133,339
Market Capitalisation $3003 million $1,901 million $6885 million $4,955 million
+ Total share ownership as disclosed in most recent annual report multiplied by company’s closing share price at end
of year.
++ Total number of options held as disclosed in most recent annual report multiplied by company closing share price at
start of year.
Source: AFR, 16 November 2002, 6 November 2002.
Could it be that this strong polarity is merely the outcome of a size effect; that is, that larger
companies exhibit lower investment risk, and therefore lower financial returns, than smaller
companies? It is the case that, in almost all cases, low performing companies have higher average
market capitalisation than high performers, which implies the presence of an organisational size

22
effect for both pay level and performance outcomes. The correlation data in Exhibit 3.3 (relating
to the largest 100 executive positions in the AFR data for 1999-2002) provides some evidence of a
negative association between company size and financial performance but the correlation is neither
consistent nor consistent. Moreover, the presence of a size effect does not negate the general
proposition that, in relative terms, large companies and their shareholders are not obtaining value
for money from the huge outlays they make to their top executives.
More sophisticated statistical analysis confirms the conclusion that the relationship between
executive remuneration levels and organisational performance is anything but positive. Drawing on
the annual Australian Financial Review executive remuneration survey data for the three years
1999 to 2002, the following analysis examines the relationship between pay and performance for
two specific categories of executive: firstly, the 100 largest executive positions (in terms of
company market capitalisation); and, secondly, the 20 most highly cash remunerated executive
positions.
Exhibit 3.2
Executive Pay and Organisational Performance: 100 Largest Executive Positions# in Australian
Listed Companies, 1999-2002 - Descriptive Statistics.
Executive Remuneration (average) Company Performance (average)
$AU million Percent
Base Salary, Super &
Benefits
Average ROE
1999-2000 1.18 1999-2000 +22.8
2000-2001 1.33 2000-2001 +34.8
2001-2002 1.50 2001-2002 +11.9
Change 1999-2002 (+27.1%)
Cash Bonuses &
Incentives
1999-2000 0.84
2000-2001 1.18
2001-2002 1.10
Change 1999-2002 (+31.0%)
Total Cash Remuneration Average Share Price
Change
1999-2000 2.02 1999-2000 +19.2
2000-2001 2.54 2000-2001 +20.9
2001-2002 2.61 2001-2002 +7.5
Change 1999-2002 (+29.2%)
Value of Shares Held+
1999-2000 190.91
2000-2001 190.18
2001-2002 159.67
Change 1999-2002 (-16.4%)
Gross Value of Options
Held++
Average Change in
Earnings Per Share
1999-2000 14.89 1999-2000 -4.2
2000-2001 9.91 2000-2001 +20.1
2001-2002 11.90 2001-2002 +22.1
Change 1999-2002 (-20.1%)
# By market capitalisation, excluding property and other trusts.
+ Total share ownership as disclosed in most recent annual report multiplied by company’s closing share price at end
of year.
++ Total number of options held as disclosed in most recent annual report multiplied by company closing share price at
start of year.
Source: AFR, 16 November 2000, 16 November 2001, 6 November 2002.

23
Exhibit 3.2 summarises the relevant descriptive statistics for the 100 largest executive positions.
The data indicates several opposing trends. On the remuneration front, the period 1999 and 2002
saw a sustained rise (totaling 29 percent) in average total cash remuneration, but significant falls in
the value of shares and options held (totalling 16 percent and 20 percent, respectively). On the
performance side, the period saw peaks in ROE and share price change in 2000-2001 but a
continued improvement in earnings per share.
Exhibit 3.3
Executive Pay and Organisational Performance: 100 Largest Executive Positions# in Australian
Listed Companies, 1999-2002 - Pearson Correlation Coefficients.
Remuneration Component Company Performance Criteria Company Size
ROE Percent Share
Price Change
Percent EPS
Change
Market
Capitalisation
Base Salary, Super & Benefits
1999-2000 -.049 .009 .074 .573**
2000-2001
-.224*
-.178 -.162 .640**
2001-2002
-.376**
-.192 -.007 .621**
Cash Bonuses & Incentives
1999-2000 -.037 .061
-.318*
.478**
2000-2001 -.122 -.134 -.130 .487*
2001-2002 -.171 -.186 -.083 .484**
Total Cash Remuneration
1999-2000 -.047 .049
-.208*
.583**
2000-2001 -.181 -.163 -.157 .611**
2001-2002
-.297** -.210*
-.064 .610**
% Annual Change in Total Cash
Remuneration
1999-2000 -.056 -.065
-.682**
-.035
2000-2001 .017 -.119 -.105 .047
2001-2002 .061 .200 -.240 .020
Number of Shares Held
1999-2000 -.029 .138 .020 .310**
2000-2001
-.395**
-.128 -.110 .358**
2001-2002
-.215*
-.187 .123 .295**
Value of Shares Held
1999-2000 -.019 .134 .007 .388**
2000-2001
-.441**
-.126 -.105 .426**
2001-2002 -.199 -.143 .083 .308**
Number of Options Held
1999-2000 -.084 .009
-.686**
.193
2000-2001
-.369**
-.126 -.144 .469**
2001-2002
-.419** -.233*
-.039 .548**
Gross Value of Options Held
1999-2000 -.035 .152 -.022 .611**
2000-2001
-.441**
-.089 -.097 .619**
2001-2002
-.370** -.240*
-.037 .691**
Market Capitalisation
1999-2000 -.036 .057 .126 1
2000-2001
-.240*
-.129 -.085 1
2001-2002 -.146
-.206*
-.100 1
#By market capitalisation, excluding property and other trusts.
** Significant at p < 0.01
* Significant at p < 0.05
Source: AFR, 1 November 1999, 16 November 2000, 16 November 2001, 6 November 2002.
Exhibit 3.3 presents a bivariate correlation matrix for eight remuneration variables and four
organisational performance variables for the 100 largest executive positions. As could have been
expected, for this group, there are positive and statistically significant correlations between the

24
remuneration components and company size (as measured by market capitalisation). Conversely,
the correlations between the remuneration components and the three main measures of
organisational performance are either negative and statistically significant, or statistically
insignificant.
12
In particular, for the two years 2000-2002 base pay level had a strongly negative
association with ROE, as did the number of shares held and the number and gross value of options
held. Moreover, for 2001-2002 total cash remuneration correlated negatively with share price
change, as did the number and gross value of options held. In short, these data provide little support
for the proposition that higher levels of executive remuneration, whether in the form of base pay,
short term cash incentives or long-term equity-based incentives, are associated with higher levels of
financial performance.
Exhibit 3.4
Executive Pay and Organisational Performance: 100 Largest Executive Positions# in Australian
Listed Companies, 1999-2002 - Multiple Regression Results
Return on Equity
Year R Square F Value Predictors
Base Pay Bonuses &
Incentives
Value of Shares Value of Options
Beta t Beta t Beta t Beta t
1999-
2000
.003 0.0650 -.057 -.292 -.016 -.113 .012 .052 .009 .026
2000-
2001
.207 6.134**
-.031 -.232 -.006 -.053 -.236 -1.164 -.216 -1.022
2002-
2002
.174 4.750**
-.286 -1.887 .159 1.253 -.004 -.032 -.252 -1.497
Percent Share Price Change
Year R Square F Value Predictors
Base Pay Bonuses &
Incentives
Value of Shares Value of Options
Beta t Beta t Beta t Beta t
1999-
2000
.069 1.606
-.403* -2.077
-.010 -.071 -.092 -.387 .569 1.719
2000-
2001
.044 1.052 -.168 -1.138 -.015 -.108 -.231 -1.042 .196 .845
2002-
2002
.060 1.528 -.009 -.056 -.063 -.477 -.016 -.129 -.187 -1.066
Percent Change in Earnings Per Share
Year R Square F Value Predictors
Base Pay Bonuses &
Incentives
Value of Shares Value of Options
Beta t Beta t Beta t Beta t
1999-
2000
.187 5.018**
.358 1.973
-.524** -4.012 -.270* -1.224
.169 .545
2000-
2001
.030 0.708 -.123 -.820 -.041 -.300 -.091 -.403 .048 .203
2002-
2002
.025 0.505 .034 .292 -.146 -1.152 .146 1.181 -.027 -.238
#By market capitalisation.
* Significant at p< 0.01
12
A correlation coefficient of +1 indicates a perfect positive association between the two
variables; a correlation coefficient of -1 indicates a perfect inverse or negative association
between the two.

25
** Significant at p < 0.05.
Exhibit 3.4 presents the results of multiple regression analyses of each of the three main
organisational performance variables (assumed here to be dependent variables) against a set of four
predictor (or independent) variables (base pay, bonuses and cash incentives, value of shares held,
and value of options held) for the three years 1999-2002. In general, the low R-square, Beta and t
values
13
confirm that these remuneration predictors explain very little of the inter-organisational
variation in performance within this group of executives. At best, the four predictors explain no
more than 20 percent of the variation in ROE within the group and here, again, the statistically
significant results are negative rather than positive. Overall, these regression results support the
conclusion that for the top 100 executive positions remuneration levels and composition made very
little positive contribution to organisational performance over the three years 1999-2002.
Exhibit 3.5
Executive Pay and Organisational Performance: 20 Highest Paid# Executives in Australian Listed
Companies, 1999-2002 - Descriptive Statistics.
Executive Remuneration (average) Company Performance (average)
$AU million Percent
Base Salary, Super &
Benefits
Average ROE
1999-2000 2.44 1999-2000 +8.56
2000-2001 3.20 2000-2001 -89.56
2001-2002 3.67 2001-2002 +12.50
Change 1999-2002 (+50.4%)
Cash Bonuses &
Incentives
1999-2000 3.17
2000-2001 4.66
2001-2002 3.73
Change 1999-2002 (+17.7%)
Total Cash Remuneration Average Share Price
Change
1999-2000 5.60 1999-2000 +41.40
2000-2001 7.87 2000-2001 +17.04
2001-2002 7.39 2001-2002 -6.79
Change 1999-2002 (+32.0%)
Value of Shares Held+
1999-2000 780.06
2000-2001 661.18
2001-2002 552.80
Change 1999-2002 (-33.0%)
Gross Value of Options
Held++
Average Change in
Earnings Per Share
1999-2000 52.25 1999-2000 -127.44
2000-2001 22.08 2000-2001 -2.13
2001-2002 33.10 2001-2002 +15.04
Change 1999-2002 (-36.7%)
13
The F statistic is the regression mean square divided by the residual mean square. A high
and statistically significant F value indicates that the selected predictors collectively account
for most of the variation in the dependent variable. The Betas, or standardised coefficients,
indicate which individual predictors contribute most to explaining the variation in the
dependent variable. The ‘t’ values can also be used for this purpose. If a coefficient has a t
value well below -2 or above +2 this signifies that the relevant predictor does have a
significant influence.

26
# By market capitalisation, excluding property and other trusts.
+ Total share ownership as disclosed in most recent annual report multiplied by company’s closing share price at end
of year.
++ Total number of options held as disclosed in most recent annual report multiplied by company closing share price at
start of year.
Source: AFR, 16 November 2000, 16 November 2001, 6 November 2002.
Analysis of the data set relating to the 20 most highly paid executives suggests similar conclusions.
Exhibit 3.5 summarises the key descriptive statistics for this group. For this elite group, total cash
remuneration peaked and gross option value bottomed out in 2001, while value of shares continued
to fall throughout the triennium. Overall, this category of executives experienced a 32 percent
cumulative rise in total cash remuneration but a decline of over one-third in the value of shares and
options held. In the companies headed by these executives, ROE declined dramatically in 2001, and
share price rises fell away, while earnings per share recovered from a slump in 2000.
Exhibit 3.6
Executive Pay and Organisational Performance: 20 Highest Paid Executives in Australian Listed
Companies, 1999-2002 - Pearson Correlation Coefficients.
Remuneration Component Company Performance Criteria Company Size
ROE Percent Share
Price Change
Percent EPS
Change
Market
Capitalisation
Base Salary, Super & Benefits
1999-2000 -.007 .359 .185 .575**
2000-2001 -.410 -.371 -.436 .759**
2001-2002
-.575**
-.314 .136 .803**
Cash Bonuses & Incentives
1999-2000 -.073 -.061 -.320 .502*
2000-2001 -.067 -.260 -.297 .509*
2001-2002
-.508*
-.198 -.082 -527*
Total Cash Remuneration
1999-2000 -.064 .108 -.181 .650**
2000-2001 -.253 -.358 -.416 .720**
2001-2002
-.732**
-.295 .024 .767**
% Annual Change in Total Cash
Remuneration
1999-2000 -.433 -.136
-.795**
-.285
2000-2001 .194 -.210 -.121 -.285
2001-2002 .302 .196 .214 -046
Number of Shares Held
1999-2000 -.095 .040 -.020 .452*
2000-2001
-.965**
-.236 -.297 .567**
2001-2002
-.530*
-.243 .168 .465*
Value of Shares Held
1999-2000 -.026 .064 .035 .511*
2000-2001
-.978**
-.240 -.302 .577**
2001-2002
-.471*
-.200 .169 .412
Number of Options Held
1999-2000
-.485*
-.042
-.769**
.124
2000-2001
-.957**
-.321 -.275 -601**
2001-2002
-.871** -.479*
-.250 .762*
Gross Value of Options Held
1999-2000 -.069 .087 .018 .751**
2000-2001
-.988**
-.241 -.243 .642**
2001-2002
-.872** -.456*
-.103 .815**
** Significant at p < 0.01
* Significant at p < 0.05
Source: AFR, 1 November 1999, 16 November 2000, 16 November 2001, 6 November 2002.

27
As the correlation coefficients in Exhibit 3.6 indicate, for this group there was an extremely
strong and statistically significant negative relationship between all components of remuneration
and ROE in 2001-2002. Regression analysis (Exhibit 3.7) indicates that, for this group, the number
and value of shares and options held had a strongly negative impact on ROE and share price change
in 2000-2002. Comparable evidence points to similar conclusions. According to Way and
Heathcote (2003, 45), of the 20 highest paid executives, only 5 have increased shareholder wealth
since July 2002. Although the share market has been falling since then (the Standard and
Poors/ASX 200 has fallen 12%), nine of these executives have presided over larger falls in their
companies’ share prices.
Exhibit 3.7
Executive Pay and Organisational Performance: 20 Highest Paid Executives in Australian Listed
Companies, 1999-2002 - Multiple Regression Results.
Return on Equity
Year R Square F Value Predictors
Base Pay Bonuses &
Incentives
Value of Shares Value of Options
Beta t Beta t Beta t Beta t
1999-
2000
.022 .083 .231 .439 .052 .136 .228 .340 -.479 -.479
2000-
2001
.987 291.126**
-.018 -.475 .042 1.217
-.400** -3.547 -.599** -5.085
2002-
2002
.783 12.654**
-.229 -1.171 -.004 -.026 .005 .030
-.669* -2.786
Percent Share Price Change
Year R Square F Value Predictors
Base Pay Bonuses &
Incentives
Value of Shares Value of Options
Beta t Beta t Beta t Beta t
1999-
2000
.297 1.582
1.070*
2.391 .139 .432 .328 .577 -1.147 -1.352
2000-
2001
.162 .678 -.291 -.873 -.104 -.356 -.288 -.303 .173 .173
2002-
2002
.227 1.099 .102 .285 .110 .392 .141 .481 -.678 -1.484
Percent Change in Earnings Per Share
Year R Square F Value Predictors
Base Pay Bonuses &
Incentives
Value of Shares Value of Options
Beta t Beta t Beta t Beta t
1999-
2000
.198 .927 .339 .711 -.446 -1.300 -.310 -.512 .182 .201
2000-
2001
.311 1.583 -.481 -1.592 -.030 -.122 -1.269 -1.470 1.193 1.319
2002-
2002
.085 .280 .139 .463 -.173 -.549 .276 .879 -.056 -.192
* Significant at p< 0.01
** Significant at p < 0.05.
It is, of course, necessary to exercise caution in making use of cross-sectional data of the above
type, since it is only by means of longitudinal (i.e. time series) analysis that the direction and
strength of causal association between executive pay levels and organisational performance can be
fully gauged and explained. However, the above findings are supported by a number of other recent

28
Australian studies (O’Neill and Iob, 1999; Holland et al, 2001) which do make use of data
covering a longer-time frame.
Holland, Dowling and Innes (2001) have recently published the findings of a composite
longitudinal study of executive pay and organisational performance in 24 large publicly listed
Australian companies
14
over a twelve year time period (1988-2000). The study uses correlation and
regression analysis to ascertain the strength and significance of the association between CEO base
salary and three measures of organisational performance, namely annual gains in sales, assets and
shareholder equity. While the data for the period 1988-93 indicates a weak but positive relationship
between pay and net assets and a stronger relationship with shareholder equity, for the period 1993-
2000 the relationships were non-linear and not statistically significant. During the 1990s, growth in
CEO base pay far outstripped growth in all performance measures. The study’s overall finding is
that ‘the relationship between CEO compensation and organisational performance of these
Australian companies is not statistically significant’ (2001, 50-52). While it could be argued that
these findings are weakened by the exclusion of cash incentives and equity-based incentives from
the analysis, they nevertheless offer general support for the conclusion that higher levels of
executive remuneration do not translate into higher levels of organisational performance.
Research by O’Neill and Iob (1999) draws on data relating to 42 CEO and 930 senior executive
positions in 49 Australian organisations, and uses change in total shareholder returns (TSR) over a
five-year period (1992-97) as the preferred measure of organisational performance. While these
researchers were interested primarily in the extent to which factors such as organisational
performance and role size determine executive remuneration levels, their findings also point to the
absence of any positive link between executive pay and performance. O’Neill and Iob conclude that
‘job size was the only significant determinant of base salary, short-term incentives and total
aggregate reward for CEOs in this sample’ (1999, 69).
15
However, their regression results also
indicate that for ‘large sized’ (i.e. CEO) roles, the association between company performance and
the level and composition of executive pay was insignificant , while for ‘medium sized’ (i.e. senior
executive) roles, company performance had a significantly negative association with every
component of pay: base salary, short-term incentives and long-term incentives (1999, 72). O’Neill
and Iob conclude that, ‘[d]espite the controversy surrounding executive remuneration, the actual
amounts paid do not have a significant impact on costs or profits for major firms’ (1999, 73). As to
the reasons for the ‘inverse relationship between senior executive pay and company performance’,
they suggest that, in response to poor performance, companies may have little choice but to pay a
premium attract and retain a CEO of sufficient talent to effect a turnaround in company
performance (1999, 73).
16
14
Aberfoyle Ltd, ANZ Banking Group, Ashton Mining, BHP, Brambles, Boral, BTR Nylex,
Coca-Cola Amatil, Coles Myer, CSR, Finemores, Hills Industries, NAB, Magellan
Petroleum, Mayne Nickless, OPSM, Pioneer, Santos, TNT, TMA Tubemakers, Wattyl,
WMC, Westpac, Woodside Petroleum.
15
Holland et al also note the strong association between company and, hence, job size and the
level of executive remuneration. Holland et al find that organisational size explained just
under 50 percent of change in base pay for the period to 1995 but that this causal
relationship weakened during more recent years to the point where firm size accounted for
just 33 percent of base pay change in 2000 (2001, 50).
16
Elsewhere, O’Neill (1999, 159) has observed that ‘there is no empirical data to support the
notion that linking pay to organisational performance at management and executive levels
actually increases required outcomes’.

29
There is no doubt that, as in the USA, the growth in executive remuneration since the late 1980s
has dwarfed gains made by ordinary shareholders. Over the past 15 years the after-tax returns on
shareholder funds of the top 1000 Australian companies has been halved - to 6.7% or little better
than the bond rate of 4.75% (Way and Heathcote, 2003, 45). As the executive chairman of
respected business research and information firm IBISWorld, Phil Ruthven, has remarked:
What is crazy is that over that period, the CEOs and the boards have been rewarding
themselves when, on average, the company performance is going down, down, down. To
me that is almost obscene. (Way and Heathcote, 2003, 45)
Having alighted from the gravy train, some ex-CEOs have taken to making a similar point. Ex-BHP
Billiton CEO Paul Anderson is a case in point. On the eve of his departure in 2002, Anderson, who
was himself the recipient of a $AU17 million termination payment, declared that CEO pay was
“totally out of control. It’s reached a point now that there’s no way to justify the incredible
compensation” (Way and Heathcote, 2002, 47).
3.2. Beyond Rent-Extraction: What Pay Level Delivers Optimum Performance?
Analysis of the Australian Financial Review data also suggests that optimum performance
outcomes may be associated with particular executive remuneration levels, configurations and pay
relativities with ordinary employees. Exhibit 3.8 presents descriptive statistics comparing
means/averages for base pay, bonuses and total cash remuneration for the 20 best performing
executives on each of three performance measures (ROE, share price change, and change in
earnings per share). These data suggest that the level of total cash remuneration associated with the
highest performance outcomes was between $AU0.85 million and $AU1.17 million. These data
support the contention by Bebchuk, Fried and Walker (2002) that the current high levels of
executive remuneration reflect systematic rent-extraction rather than optimal principal-agent
bargains, and that the growing emphasis on executive incentives is primarily a cover for this
process.
Exhibit 3.8
Maximum Performance for Pay, 2001-2002: Optimal Ratio of Executive Total Cash Remuneration
to Average Full Time Employee Earnings.
Return on Equity
20 Best (Mean)* As a Ratio of AFTATE**
Return on Equity
+50.3%
Base Salary, Super & Benefits $776,667
Bonuses and Other Incentives $394,684
Total Cash Remuneration $1,171,351 24:1
Share Price Change (%)
20 Best (Mean) As a Ratio of AFTATE
Annual Change in Share Price +87.2%
Base Salary, Super & Benefits $697,799
Bonuses and Other Incentives $149,942
Total Cash Remuneration $846,741 17:1

30
Change in Earnings Per Share
20 Best (Mean) As a Ratio of AFTATE
Annual Change in Diluted
Earnings Per Share
+288.9%
Base Salary, Super & Benefits $929,891
Bonuses and Other Incentives $151,385
Total Cash Remuneration $1,081,276 22:1
* n=181 executives.
** Based on AWFTTE for November Quarter 2002.
Sources: AFR, 6 November 2002; ABS, Average Weekly Earnings, Australia, Cat.6302.0.
Significantly, these performance-optimal pay levels also equate to between 17 and 24 times the
prevailing (November 2002) level of average full time annual total earnings. Comparing this with
the data given in Exhibit 1.2, above, it can be seen that this was the approximate scale of the pay
gap between CEOs and ordinary employees which prevailed in Australia prior to the surge in
executive remuneration in the 1990s. It may therefore be inferred that the current average pay gap
between top 100 CEOs and ordinary employees (c. 80:1) is at least three times higher than that
required to maximise organisational performance.
3.3 Performance Hurdles: Alternative Options?
Traditional executive incentive plans have been criticised for being discretionary in nature and for
not presenting a clear ‘line of sight’ between performance and reward. Standard share option plans,
in particular, are said to possess a number of key weaknesses from the organisational (and
especially the ordinary shareholder) perspective:
• There is no downside risk to the executive. If share price falls, shareholders will be worse off in
absolute terms, but not so the executives.
• The link between performance and reward is remote. There are so many uncontrolled variables
influencing share price that it represents a very remote measure of the executive’s own
contribution. In a bull share market, executives whose performance is mediocre will still stand
to make a large capital gain, whilst in a bear market, even the best executives will be penalised.
• Equity ownership is usually temporary. If the option is exercised, the shares are often resold
immediately to realise a capital gain. This means that there is no long-term ‘ownership’ effect.
• Exercised options will ‘dilute’ shareholder equity. When options are exercised and the acquired
shares then sold, the resulting increase in share supply may dilute share values, which will be
detrimental to ordinary shareholders
• Options are a cost to the company and, hence, to shareholders but this is not recognised in
company accounts. Options are a substitute for cash payment to executives and should therefore
be fully expensed using an accepted standard formula so as to reveal the true costs of executive
hire and retention.
• Options invite market manipulation. Simply by releasing overly optimistic forward profit
figures or by raising the possibility of a takeover, the executive can make a windfall gain.
Research by Kasznik and Aboody (1998) has revealed that executives can use their power to
make corporate disclosures, especially immediately prior to options being granted and being
exercised, to maximise their gains. Corporate disclosures and earnings forecasts tended to be
less optimistic immediately before option grants being made, and more optimistic immediately
prior to options being exercised.
With a view to strengthening the pay-performance link, a growing number of company boards have
introduced a range of performance hurdles to short- and long-term incentive plans. Access to short-

31
term cash bonuses, share bonuses and options have been linked to the achievement of specified
performance targets. Among the most widely used performance criteria hare are:
• Pre/post-tax annual profit
• Earnings Before Interest and Tax (EBIT)
• Earnings per share (EPS) growth
• Return on assets (ROA)
• Return on equity (ROE)
• Total shareholder returns (TSR)
• Economic Value Added (EVA)
In relation to long-term incentives, it is becoming increasingly common for executive option grants
to be hedged with special performance hurdles that seek to motivate executives to add value to
company shares before being able to realise any gain. Such devices include:
• Longer minimum vesting periods. It is increasingly common for options to be issued at the
current company share price but only exercisable after a minimum period or when the price
reaches a specified higher level. Typically, the minimum no vesting period is three years and
the maximum is five years.
• Premium pricing of options. Premium pricing involves granting options at prices above the
price prevailing at the date of grant. This means that the market share price must appreciate
before the executive starts to make a gain.
• Zero exercise price options (ZEPOs). These are basically conditional share bonuses and
typically provide for the vesting of share grants to executives free of charge when specific
performance hurdles are met. These provide some reward to the executive even if movement in
the company share price is slow or negative.
• Shareholder earnings hurdles. Firms are also tying options to specific performance targets and
hurdles, particularly to the achievement of specific increase in shareholder returns.
• Share price indexing. To factor out market-wide share price movements which have little or no
relationship to either executive or company performance, many firms now index the company’s
share price against overall market trends. A more precise measure of a company’s relative share
performance involves indexing its share price or total shareholder returns against that of ‘peers’
in the same industry. A growing number of executive option schemes now use industry share
price deflaters of this type to minimise the possibility of the CEO making windfall gains or
incurring externally-driven losses.
O’Neill and Berry (2002, 235) report that target-based plans now cover 80 percent of senior
executives in major Australian companies, as compared with 52 percent in 1994. One of the most
common hurdles currently in use is the achievement of total shareholder returns (TSR) in excess of
the median TSR of a specified group of comparator companies (O’Neill and Berry, 2002, 240).
Exhibit 3.9 details some of the key performance hurdles now applied to executive option plans in
some of the largest Australian companies.
Exhibit 3.9
Performance Hurdles Applied to Executive Option Plans in Australian Companies, 2002.
Company Key Performance Hurdles Vesting Period
Commonwealth
Bank*
Fifty per cent of allocated shares vest if the Bank’s TSR is equal to the
average return of peer institutions, 75 per cent vest at the 66th
percentile in the index and 100 per cent when the return exceeds the
75th percentile.
Minimum three years.

32
Westpac Options fully vest only if Westpac’s growth in total returns to
shareholders is at or above the 75th percentile of the top 50 companies.
Minimum three years,
maximum five years.
ANZ The ANZ accumulation index must equal or exceed the accumulated
banking and finance index and the ASX l00 accumulation index for the
full exercise of options.
Three to seven years.
Options for the CEO
expire four or five years
from the date of grant.
National
Australia Bank
NAB’s TSR is given a percentile ranking in comparison with the ASX
top 50 companies. If it does not reach 25 during the performance
period, the options are not exercisable.
Three to eight years.
St George Bank EPS growth must exceed annual compound growth of 10 per cent. Minimum 30 months,
maximum 5 years.
Macquarie Bank Bank’s average annual return on ordinary equity for the three previous
financial years is at or above the 65th percentile of the corresponding
figures for all companies in the S&P/ASX 300 Industrials Index.
One third after each of
two, three and four years.
Telstra* The 30-day average of the Telstra accumulation index must exceed the
30-day average of the All Industrials Accumulation index between the
third and fifth anniversary of allocation.
Three to 10 years.
Optus Share price must rise above the exercise price. Schemes for senior
executives measure Optus’ performance against an
international pool of benchmark companies.
Generally 30 per cent
after each of the first and
second years. Options
generally exercisable after
the third year. Expire in
the 10th year.
Woolworths Compound annual earnings per share (EPS) growth and TSR must be
above market performance.
Progressive vesting
between three and five
years. For grants since
July 2002, between four n
five years.
Westfield Regard is taken of the group’s performance during the period, as well
as the individual’s performance and the performance of relevant
operations divisions.
25 percent after three
years, 25 percent after
four years, and 50 percent
after five years from the
date of grant.
Coles Myer TSR must exceed that of the ASX 100 over the same period. For the
managing director, TSR must be in the 50th percentile or better of the
top 50 industrials or the company must achieve a minimum EPS
annual compound growth rate.
Three to five years.
Harvey Norman Performance hurdles determined by market place and reflected in share
price.
Minimum three years.
Maximum five years.
News Corp. Options are issued at market value so shares need to appreciate for
benefit to be received.
Each options grant vests
at 25 per cent a year over
four years.
BHP Billiton TSR performance must be greater than the 50th percentile compared to
the peer comparator group and then only a proportion will vest
depending on where BHP Billiton is positioned.
Minimum two years.
WMC* Company’s performance against an index of industry peers.
One year.
Santos Minimum of 10 per cent total shareholder return per annum (capital
growth plus dividend).
Three to five years.
Amcor Total shareholder return is to exceed a comparator TSR.
One year.
Brambles Must meet or exceed the performance of the top companies in the ASX
and FTSE leaders indices. Hurdles also relate to achieving total
shareholder value returns.
Generally three to five
years.

33
Mayne Group The recipient has the right to exercise the options in the vesting period.
Minimum 42 months,
maximum 60 months.
Qantas* The percentile performance of Qantas (based on average relative TSR)
within a modified ASX 200 Index and within an international airline
‘peer group’.
Minimum three years,
maximum eight years.
Tabcorp The company’s TSR is ranked against the top 100 companies in the
ASX 200 excluding mining companies and property trusts. The
ranking determines the number of options that become exercisable.
Not specified. Depends
on performance hurdles
being achieved.
Coca-Cola
Amatil
Total shareholder return performance against a peer group of
Australian companies. Shares must appreciate to receive benefit.
Three to five years.
IAG TSR is ranked against the ASX 100 index over a period of three to five
years. The share rights are not exercisable if it ranks less than the 50th
percentile.
Three to five years.
AMP* The board determines the number of options to be vested based on
AMP’s financial performance measured by shareholders’ returns.
Minimum three years,
maximum 10 years.
Southcorp The absolute increase in the share price over a defined period.
Normally three to four
years.
James Hardie In some cases, TSR needs to exceed the 50th percentile before the
options are granted and the return must exceed the 75th percentile
before all the options are granted.
Minimum three years.
Maximum five years.
Leighton TSR must equal or exceed the percentage increase in either the ASX
All Industrials Accumulation index or the ASX 100 Industrials
Accumulation Index over the two years since the options were granted.
Minimum two years,
maximum five years. Not
more than 50 per cent of
options can be exercised
before the third year.
Patrick Corp The options are issued at a premium to the market and the principal
hurdle is to see the share price appreciate over time.
One third after each of the
first, second and third
years. Options expire
after five years.
* Companies have abandoned or eliminated further issues of executive options from this financial year.
Source: Murray (2002), pp.48-49.
Despite the intention behind the adoption of performance-contingent plans of the above type, there
is as yet little hard evidence that the inclusion of such performance hurdles in executive incentive
plans do deliver improved levels of organisational performance. The 2001-2002 Australian
Financial Review survey data includes details on 39 executives from the companies whose
performance share and option plans are detailed in Exhibit 3.9. In 2001-2002, these executive had
an average base salary of $AU2.32 million, bonuses and incentives of $AU2.05 million, total cash
remuneration of $4.39 million, shares valued at $AU271 million, and gross option value of
$AU49.8 million. Yet this group presided over performance outcomes little different from those
achieved by their counterparts occupying the 100 largest positions: ROE of 13.4 percent compared
to 11.9 percent achieved by the largest 100, and change in earnings per share of 25.5 percent
compared to 22.1 percent. In relation to share price change, performance was considerably lower
than that of the largest 100: minus 4.4 percent compared to plus 7.5 percent.
Exhibit 3.10 presents the correlation coefficients for these 39 executives. As the coefficients
indicate, a positive association between pay and performance is no more in evidence here than it is
for the larger group of executives represented in the 2001-2002 Australian Financial Review survey
data. The multiple regression results for this group (Exhibit 3.11) confirm the point. Ironically, for
this group, it was the number and value of options held which had the strongest negative correlation
with performance.

34
Exhibit 3.10
Executive Pay and Organisational Performance: 39 Executives in Australian Listed Companies
with Performance Hurdles, 2001-2002 - Pearson Correlation Coefficients.
Remuneration Component Company Performance Criteria
ROE Percent Share
Price Change
Percent Change in
Earnings per Share.
Base Salary, Super & Benefits
-.639**
-.227 -.005
Cash Bonuses & Incentives
-.405*
-.165 -.177
Total Cash Remuneration
-.577**
-.217 -.136
% Annual Change in Total Cash Remuneration .224 .250 -.201
Number of Shares Held
-.369*
-.221 .007
Value of Shares Held
-.348*
-.153 .024
Number of Options Held
-.718** -.337*
-.031
Gross Value of Options Held
-.678**
-.284 -.125
** Significant at p < 0.01
* Significant at p < 0.05 level
Source: AFR, 6 November 2002.
Exhibit 3.11
Executive Pay and Organisational Performance: 39 Executives in Australian Listed Companies
with Performance Hurdles, 2001-2002 - Multiple Regression Results.
Year R Square F Value Predictors
Base Pay Bonuses &
Incentives
Value of Shares Value of Options
Beta t Beta t Beta t Beta t
ROE
.506 8.184**
-.335 -1.714 .082 .505 -.007 -.049
-.476* -2.197
Share
Price
Change
.082 .755 -.043 -.166 .017 .081 -.003 -.016 -.261 -.909
EPS
Change
.059 .468 .016 .085 -.232 -1.166 .121 .605 -.119 -.669
* Significant at p < 0.05
*** Significant at p < 0.001
What might account for the apparent ineffectiveness of formal performance hurdles? It may simply
be that such practices are too recent to have yet had any discernible impact. Another possible
reason is that traditional financial hurdles are open to ‘system gaming’. As O’Neill notes:
If an executive’s bonus is dependent on meeting or exceeding an agreed budget, it is a fair bet
that the budget setting process is likely to be compromised by significant negotiations
predicated on a potential remuneration outcome, rather than on genuine longer term corporate
performance issues. (1999a, 160)
Profit-based bonuses have particular problems in this regard. Profit-related bonuses are typically
paid after a threshold figure, or trigger is reached, but the ‘line of sight’ between reward and
performance is usually weak since profitability is susceptible to random movements in uncontrolled
variables such as materials costs and interest rates. Moreover, in order to get a higher short-term
reward, the executive may artificially inflate paper profits by postponing infrastructure investment
or cutting back on research and development. This will deliver a short-term personal gain but only
at the cost of long-term organisational performance. A post-tax profit formula would align more
closely with shareholder interests since it post-tax profit is the basis for the calculation of dividend
levels, but it could still be affected by external variables like random changes to tax law.
A bonus formula based on earnings per share directly links bonuses to the two components of
shareholder earnings, namely dividends and share price appreciation. While this will bring the
interests of the executives into closer alignment with that of the shareholders, it also has some

35
limitations. In particular, share prices are subject to a range of influences over which the
executive has little or no control, such as random fluctuations in share market demand. In some
plans of this type, the share price target is benchmarked against a wider share index to factor out the
effect of general share market trends. However, this gives only a relative and not an absolute
measure of performance. If the firm’s share price falls less than the industry benchmark, the target
is still met and the bonus paid, even though shareholders have still lost value.
The application of performance hurdles may simply encourage executives to hedge their risks still
further by demanding larger numbers of options: ‘The logic of this relationship is based on the
notion that if the probability of the options vesting is only 50 percent, there is a need to issue twice
as many to ensure that the expected reward outcome remains constant’ (O’Neill and Berry, 2002,
240).
These are some of the reasons why the greater use of performance hurdles has not translated into
higher levels of organisational performance. A related factor here is poor follow-up and evaluation.
Notwithstanding the trend towards a greater use of incentive programs, ‘the vast majority of these
companies admit that they do not know the impact these plans have on business performance’
(O’Neill and Iob, 1999, 74). Less that one in four companies have any formal process for
evaluating plan effectiveness (O’Neill and Berry, 2002, 23). Such shortcomings highlight the
pressing need for a more rigorous and accountable approach to corporate governance by company
boards.
3.4 Conclusions
The data and analysis presented in this chapter provide little support for the contention that
executive remuneration practices do enhance traditional financial measures of organisational
performance. Indeed the analysis indicates a range of negative correlations between the quantum of
executive remuneration and traditional measures of organisational performance. The performance
outcomes in the firms headed by Australia’s highest paid CEOs seem to bear this out. High
executive pay does not necessarily translate into high organisational performance. Indeed, the
current average pay gap between top 100 CEOs and ordinary employees appears to be is at least
three times higher than that required to maximise organisational performance. Moreover, far from
increasing financial performance, the increased emphasis on short- and long-term incentives in
Australian executive remuneration packages is associated with lower rather than higher levels ROE,
share price change and change in earnings per share. The inclusion of performance hurdles in
executive incentive plans seems thus far to have done little to strengthen the pay-performance link.

36
CHAPTER 4
Banking the Bucks: Senior Executive Remuneration in the Australian
Banking Industry.
This case study explores executive pay in the four largest banks: the National Australia Bank
(NAB); the Commonwealth Bank of Australia (CBA); Westpac; and the Australia and New
Zealand Banking Corporation (ANZ). It examines the remuneration of CEOs, other executives and
non-executive directors reported in the banks annual reports for 2002. The study also compares the
remuneration of CEOs to that of customer service officers, the degree to which performance
hurdles for executives are evident in the Bank’s annual reports, concerns over the lack of expensing
of stock options and the lack of timely disclosure of executive employment contracts. In addition,
the case study questions the relationship between rising corporate profits and declining social
responsibility by contrasting the banks’ economic performance in recent years against the numbers
of branch closures, job losses and increases in workloads experienced by staff.
4.1 Executive and Non-Executive Director Remuneration in the Four Major
Banks
This section provides the total cash remuneration paid to CEOs, other senior executives and non-
executive directors of the four major banks for 2002 using data contained in the banks’ annual
reports for 2002.
CEO Remuneration
The total remuneration for the CEO of the Commonwealth Bank, David Murray, for 2002 was
approximately $AU8.9 million. This figure includes base pay, bonuses, superannuation and a long
service bonus of $AU4.65 million. Murray also received 250,000 options with a fair value of
$AU2.01 using the Black-Scholes option pricing model worth $AU502,500 and 42,000 shares
under a share grant where ‘no consideration is payable by the executive for the grant of shares’.
The average share price for the CBA for the week on 24-30 June 2002 was $AU33.36, putting the
value of the 42,000 shares at $AU1.4 million.
The total remuneration for the CEO of NAB, Frank Cicutto, for 2002 was $AU2.62 million. He did
not receive any stock options for 2002. This represents a drop from the previous year of $AU2.93
million and reflects the $AU4 billion in losses by the bank’s US mortgage arm HomeSide. When
comparing 2001 to 2002 Mr Cicutto’s base salary jumped $AU280,000 to $AU1.76 million (up 19
percent) in 2001-2002, though his performance based remuneration was almost halved to
$AU765,000 from $AU1.35 million (Sydney Morning Herald, 26 November 2002, 21).
The CEO of Westpac, David Morgan, received compensation to the value of $AU6.18 million. This
included base pay and short term incentives valued at $AU3.58 million and a $AU2.6 million stock
option grant comprised of 1.1 million options with a ‘notional value’ of $AU2.37 (Westpac Annual
Report, 2002, p.51). The total remuneration for the ANZ’s CEO, J McFarlane, for 2002 consisted
of $AU5.58 million and comprised $AU1.42 million salary, $AU1.4 million of performance related
bonuses of deferred shares and $AU80,500 in superannuation payments. He also received options
valued at $AU2.68 million. The value of the options was determined by multiplying two lots of
500,000 options issued on 31 December 2001 with a fair value, using a modified Black-Scholes
model, of $AU2.68 per option (ANZ Annual Report 2002, 53).
Exhibit 4.1 summarises the estimated total remuneration of the CEOs of the ‘big four’ banks.

37
Exhibit 4.1
CEO remuneration in the four major banks, 2002.
ANZ Westpac CBA NAB Total
($AU million)
CEO cash remuneration in 2002 5.58 6.18 8.9 2.62 23.29
CEO Pay in Comparison to that of Customer Service Staff
While the overall ratio of average weekly earning to executive pay for 2002 was 74:1, in the
banking sector the ratio of CEO pay across the four biggest banks to that of customer service staff
was 188:1. The largest difference occurred at CBA. The CEO, David Murray, whose total pay for
2002 was $AU8.9 million, received 307 times the salary of customer service employees for 2002.
The salary of a grade 1 customer service officer was $AU29,001 under the Commonwealth Bank of
Australia Retail Banking Services Enterprise Bargaining Agreement 2002 (CBA, 2002). At
Westpac, the CEO’s total package of $AU6.18 million was 191 times the pay of a grade 1 customer
service officer, who received a maximum of $AU32,430 under the Westpac Banking Corporation
(SA/NT/TAS) Enterprise Development Agreement, 2002 (Westpac, 2002). The next largest pay
gap was at ANZ where the CEO’s package of $AU5.58 million was some 187 times larger than that
of a customer service officer grade 1. Under the 1998 Enterprise agreement, which remains in
force, a customer service officer grade 1 was paid $AU29,836 (ANZ, 1998). At the end of the
queue is the difference between customer service officers grade 1 at the NAB and the CEO, Frank
Cicutto, which stood at a comparatively low ratio of 81:1 for 2002. This can largely be explained
by the lack of share options provided to the CEO while his performance bonus was significantly
reduced from the previous year. A grade 1 employee at NAB received $AU32,430 under the
National Australia Bank limited Enterprise Agreement 2002 (NAB, 2002).
The Remuneration of Other Senior Executives
The entitlements provided to executives across the four major banks over 2001-2002 has created a
burgeoning number of millionaires: ‘The number of senior bankers earning more than $AU1
million in the 2002 financial year jumped from 39 to 51. According to disclosures made by the four
majors – ANZ, NAB, Westpac and Commonwealth Bank, 211 senior executives received aggregate
payments of $AU180.9 million in 2002 compared with 134.2 million in 2001’ (Lekakis, 2002,
p.28). These figures include base salary payments, performance-based bonuses, superannuation and
retention payments, but exclude lucrative options programs. In 2002 the NAB alone gave 11.26
million options to 751 senior executives valued at almost $AU72 million (Sydney Morning Herald,
26 November 2002, 21).
The 6 senior executives who reported directly to CBA CEO David Murray received a total of
$AU8.24 million. This figure was calculated by adding the total remuneration amounts of the 6
senior executives disclosed on the 2002 CBA annual report. The figure included base pay, bonuses
(paid this year and vested in CBA shares), superannuation as well as other compensation.
Excluding the CEO, the next seven senior executives at NAB whose remuneration was listed in the
annual report were paid a total of $AU21.25 million: ‘The biggest slice of the NAB salary pie
however went to an executive employed for little more than a year. Mr Whiteside was the white
knight sent in to take charge of HomeSide. Mr Whiteside’s $AU5.9 million remuneration included
$AU3.3 million in performance bonuses paid for stabilising and then selling the US business for a
surprise $AU6 million profit’ (Charles, 2002, p27).
The six most senior executives at Westpac after the CEO were paid a total of $AU5.90 million.
This figure was calculated by adding the total remuneration amounts of the 6 non-executives

38
disclosed on the 2002 Westpac annual report. The amount includes base pay, short term
incentives and other compensation. The total amount paid to the next five senior executives
mentioned in the annual report after the CEO was $AU6.73 million (ANZ Annual Report p.53).
The $AU6.73 million is calculated by adding the total remuneration amounts of the 5 executive
disclosed on the 2002 ANZ annual report. The amount includes salary/fees, benefits performance
related bonuses (both cash component and deferred shares) and superannuation contributions.
Remuneration of Non Executive Directors
Within the CBA the 10 non-executive directors were paid a total of $AU1.31 million. This figure
was calculated by adding the total remuneration of each director outlined in the 2002 annual report.
The report indicates that the total remuneration category includes base fee/pay, committee fee,
salary sacrifice and superannuation. Retirement allowances however were not included in this
amount (CBA Annual Report, 2002, p.48). In addition, the directors participated in the CBA’s Non-
executive Directors’ Share Plan (NEDSP). This plan ‘provides for the acquisition of shares through
the sacrifice of 20 percent of their annual fees. The shares purchased are restricted for sale for 10
years or when the director leaves the board, whichever is earlier’ (CBA Annual Report, 2002,
p.48). The amount of shares purchased under this plan during the 2002 financial year totalled
14,511.
At NAB, the 8 non-executive directors were paid a total of $AU1.62 million. The $AU1.62 million
is calculated by adding the total remuneration for the 8 non-executives disclosed in the 2002 NAB
annual report. This figure included fees/cash, the share component and other benefits: ‘The
aggregate number of shares acquired by non-executive directors as part of their remuneration was
9,233 shares issued at an average price of $AU34.50’ (NAB Annual Report, 2002, p.68). The total
does not include, however, the accrual of retirement allowance benefits that was worth
$AU693,292.
The 2001-2002 financial year saw 11 non-executive directors at Westpac paid a total of $AU2.67
million.
The $AU2.67 million was calculated by adding the total remuneration paid to the 11 non-
executives disclosed in the 2002 Westpac annual report. The total includes fees, superannuation
guarantee charges and retirement/resignation payments. It also includes the retirement resignation
payments provided to 5 directors which amounted to $AU1.38 million. Directors’ holdings of
shares and options as at 31 October 2002 totalled 5.21 million ordinary fully paid shares and
options (Westpac Annual Report, 2002, p.50).
The total fees paid to eight non-executive directors by the ANZ for 2002 amounted to $AU1.19
million.
The $AU1.19 million includes income from salaries, bonuses, other benefits (including
non-cash benefits), retirement benefits and superannuation contributions’ (ANZ Annual Report,
2002, p.68). These directors were further compensated with a total of 1.75 million options and 1.38
million fully paid ordinary shares in the company (ANZ Annual Report, 2002, p.67).
4.2 Performance Hurdles for Bank Executives.
Over the last 15 years there has been a decline in the overall proportion of remuneration allocated
to a fixed amount of base pay for executives and a growing emphasis on both short-term (STIs) and
long-term incentives (LTIs). In most cases, short-term incentive plans measure executive
performance in relation to measures such as net operating profit after tax or operating income
though other measures such as return on equity and return on capital employed are also commonly
used as they take account of the return on capital invested in the company (O’Neill and Berry,
2002, 233). Many companies have introduced a target-based approach to measuring the
achievement of STIs. At the beginning of the financial year performance criteria are outlined and
the levels of rewards available for each proportion of targets achieved is determined. This approach

39
measures executive performance against measures such as profits, return on investment, and
return on net assets. While some of the banks outline a philosophy that appears to mirror these
trends, there is little if any real detail of the level of performance hurdles that executives need to
meet or the level of rewards on offer for each target or proportion thereof that they meet.
As has been shown (see Exhibit 3.9) performance hurdles are also now widely applied to LTIs,
including option plans, in the Banking industry. In the case of Westpac, a new Westpac
Performance Plan has replaced the General Management Share Option Plan and the Senior
Officers’ Share option plan. Westpac claims that the plan imposes stringent performance hurdles on
executives: ‘Under this new hurdle, all rights to performance options and performance share rights
are lost if our TSR [total shareholder return] performance fails to be at or above the middle
(median) performance of the peer group over the specific performance periods…’ (Westpac Annual
Report, 2002).
At the ANZ, stock options form a major element of the long-term incentives provided to executives
and the performance hurdles for these options have been tightened in 2002. ‘The new option has a
dynamic exercise price, i.e. the exercise price will be adjusted in line with the movement in the
S&P/ASX 200 banks (Industry Group) Accumulation Index (excluding ANZ). This has replaced
the “traditional” option where executives could benefit from a general rise in the market…’ (ANZ
Annual Report, 2002).
At the Commonwealth bank the allocation of options has been linked to meeting the total
shareholder return of comparator financial institutions:
Effective from 1 July 2002, options will no longer be issued under the Equity
Reward Plan. In future Reward Shares only will be issued under this plan. A further
change introduced is that whereas previously allocated options and shares vested
upon the weighted average Total Shareholder Return of peer institutions being
exceeded, a tiered vesting scale has been introduced so that 50% of allocated shares
vest if the bank’s Total Shareholder Return is equal to the median return, 75% vest
at the 67
th
percentile and 100% when the Bank’s return is in the top quartile. Options
and shares previously allocated under the Equity Reward Plan will continue until
they vest upon the prescribed performance hurdles being met or they lapse.
(Commonwealth Bank, Annual Report 2002, 50)
Nevertheless, in relation to the NAB, the Australian Shareholders Association has expressed its
opposition to the NAB’s share option plan for executives because a section of this scheme allows
for options to be exercised for below average performance (ie. 25-50
th
quartile) (Australian
Shareholders Association Website, 2002).
In addition, executive remuneration commentators have highlighted a range of problems with this
approach to executive rewards. First, there are no details provided in the banks annual reports
regarding the specific targets that CEOs and other executives have to meet in order to receive their
bonuses, stock options or share grants other than the exhortation that it will be based on a
comparison of other financial institutions. As Alan Kohler has highlighted in relation to the CBA,
while ‘There is a general statement about how the CBA hurdle works (exceeding average total
shareholder return of peer companies), but no explanation of exactly how Murray earned his bonus
[$AU670,000] or the 42,000 shares [$AU1.4 million]…’ (Kohler, 2003, 72). Second, there is the
danger that in order to reach the specific short-term targets set for them CEOs, and other
executives, have considerable incentive to put off spending on research and development and
infrastructure projects. Third, where executives can see that they are performing below the hurdle,
there may be a temptation to engage in high-risk activities in order to achieve the targets. Fourth,

40
share price volatility often occurs because of factors beyond the control of executives such as
changes in the economy and international developments. Fifth, the outcome of such comparisons is
relative rather than absolute and even if the share price falls, as long as the fall is less than that of
comparator companies, the performance hurdle may still be met, even where shareholders have
suffered an absolute decline in the value of their shares. Sixth, this approach to executive
motivation and performance management can significantly inflate the number of stock options
being allocated as ‘…if the probability of the options vesting is only 50 percent, there is a need to
issue twice as many to ensure that the expected reward outcome remains constant’ (O’Neill and
Parry, 2002, 233-240).
4.3 Commercial-in-Confidence: Non-Expensing and Non-Disclosure
Non-Expensing of Options
The granting of share options to executives is beneficial for the major banks as they appear to have
no cost. This is because accounting rules do not require them to be taken as an expense as long as
the grant price is fixed. This is advantageous as ‘issuing options and shares dilutes the asset backing
of a company and there is a definite cost involved that should be charged to company revenue
under internationally accepted accounting principles’ (Wasiliev, 2002).
None of the four major banks charged the cost of options as an expense in their financial statements
in 2002. For example, in relation to the NAB ‘…the Company adopts the intrinsic value method for
valuing options issued under the plan. Under the intrinsic value method, a nil value is ascribed to
the option issued under the plan, as the exercise price and market value of the options at issue date
are equivalent …[though] The Company intends to adopt the new standard in relation to accounting
for share options once it is issued by the IASB and the Australian Accounting Standards Board’
(NAB Annual Report, 2002, 71)
The CEO for NAB did not receive any share options for 2002 though the next seven senior
executives received an aggregate of 925,000 options whose fair value was $AU5.9 million. Overall
within NAB: ‘During and since the end of 2002, 11,263,500 share options were granted to 751
senior employees (including the options granted to senior executives…). The fair value of these
options amounted to $AU71.86 million’ (NAB Annual Report, 2002, 70).
The Commonwealth Bank also failed to expense the stock options allocated to executives in its
financial statements though it concedes that ‘Based on the current deliberations of the International
Accounting Standards Board on recognition of an expense for equity based compensation, the
Group would be required to recognise an expense for the fair value of the options issued’
(Commonwealth Bank Annual Report 2002, 51). The CBA’s CEO, David Murray, received stock
options worth $AU502,500 and a ‘share grant’ worth $AU1.4 million. The six senior executives
who reported directly to David Murray were provided with a total of 575,000 options as well as
82,000 shares (CBA Annual report, 2002, 49). This amount is calculated by totalling the option
grant numbers and share grant numbers for all of the executives (excluding the CEO) from the 2002
CBA annual report. Cumulatively, just over 3 million executive share options were granted by the
CBA during the 2002 financial year at a fair value of $AU6.03 million.
During the current year
2,994,500 options were issued with a fair value of $AU2.01, with 12,500 options issued with a fair
value of $AU1.53. Fair value for CBA stock options is determined using the Black-Scholes option
pricing model and includes a 50 per cent discount in recognition of the likelihood that executives
will not be able to meet the performance hurdles established and will be unable to exercise a
sizeable number of the options available (CBA Annual report, 2002, 51).

41
The CEO of Westpac received $AU2.6 million of stock options for 2002. The six next senior
executives listed in the 2002 Annual received 1.5 million performance options and 424,528
performance share rights (Westpac Annual Report, 2002, 52). Had Westpac accounted for the total
cost of executive options across the company, it would have resulted in an expense of $AU48
million (Westpac Annual Report, 2002, Directors Report).
At ANZ the CEO received stock options worth $AU2.68 million in 2002. The options received by
the next five senior executives detailed in the 2002 Annual Report totalled 903,700 with a fair value
of $AU1.66 million using the Black-Scholes model. The $AU1.66 million was derived by adding
the 364,100 options issued on 24 April 2002 (with a fair value of $AU2.95) to the 539,600 options
issued on the 24 October 2002 (with a fair value of $AU1.10) (ANZ Annual Report 2002, 53).
Non Disclosure of Bonuses
The announcement of the record $AU32.75 million payment to Chris Cuffe, the former chief
executive of Colonial First State, by the CBA in February 2003 on his departure from the
organization highlights the lack of timely disclosure of these contractual arrangements between the
banks and their employees. According to Cuffe the CBA renewed his contract in 2000 as part of its
takeover of Colonial First State and did so again in 2002. The lack of disclosure of the details of
Cuffe’s employment contract contrasts with the situation that has existed in the US for many years
where the remuneration of CEOs is fully disclosed by way of proxy statements (Kohler, 2003, 72).
The Cuffe payment highlights the need for changes to the Corporations Act and the ASX listing
rules that would require these contracts to be disclosed when the contract is negotiated rather than
when it is paid out. Such timely disclosure requirements might also make boards of directors more
cautious when negotiating such deals (Whyte, Murray, & Cornell, 2003, 81).
4.4 Performance at a Price
What evidence is there that this ever-rising largesse has served to enhance bank financial
performance? The ‘big four’ banks have certainly achieved impressive growth in reported net
profits in recent years. As Exhibit 4.2 indicates, the net profits of Australia’s four major banks have
increased steadily over the past decade.
Exhibit 4.2
Net Profits for the Four Major Banks, Australia, 1993-2002. ($AU million)
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002*
($AU Million)
ANZ 247 822 1,052 1,116 1,024 1,106 1,480 1,747 1,870 2,322
CBA 443 682 983 1,119 1,078 1,090 1,422 1,678 2,262 2,501
NAB 1,129 1,708 1,969 2,102 2,223 2,014 2,821 3,239 2,083 3,379
Westpac 39 705 947 1,132 1,291 1,342 1,456 1,715 1,903 2,192
Total 1,858 3,917 4,951 5,469 5,616 5,552 7,179 8,379 8,118 10,394
Source: FSU Website. (2001). ‘The facts on big bank profits’
*
2002 net profit figures taken from each of the bank’s 2002 annual report.
However, a closer analysis points to a rather different set of conclusions. While the small size of
this CEO group is not sufficient to support correlation and regression analysis, using the Australian
Financial Review data, it is still possible to track longitudinal change in average CEO pay and
organisational performance in eight major banks for the four year period 1998-2002. The banks
represented are the National Australian Bank, Westpac, ANZ, Commonwealth Bank, Macquarie, St
George Bank, Bankwest, and Suncorp-Metway.

42
Exhibit 4.3 summarises the key descriptive statistics for this group of eight. In contrast to the
data for the executive groupings considered in Chapter 3, the data for bank CEOs reveals a
divergence between trends in average executive remuneration and organisational performance since
1998. On the one hand, since 1998 the bank CEOs have enjoyed a sustained increase in the average
value of both the cash and equity components of their remuneration. Over this period, their average
total cash remuneration rose by 57 percent, a rate of increase considerably higher than that achieved
by most other executives, including the 20 most highly cash remunerated executives (see Exhibits
1.1 and 3.5, above). Again, in contrast to the latter, since 1998 the bank CEOs have seen the
average value of their share holdings rise by almost 70 percent since 1998 and the gross value of
their option holdings increase by 90 percent. Conversely, over the same period, the eight banks
headed by these CEOs have experienced a sustained decline in ROE, and a deceleration in both
share price growth and growth in earnings per share. Over the four year period, cumulative growth
in spare price and in earnings per share (21 percent and 20 percent, respectively) fell well short of
the growth in the growth in executive cash remuneration and equity wealth.
Exhibit 4.3
Executive Pay and Organisational Performance in Eight Major Australian Banks#, 1998-2002
- Descriptive Statistics.
Executive Remuneration (average) Company Performance (average)
$AU million Percent
Base Salary, Super &
Benefits
Average ROE
1998-1999 1.01 1998-1999 +14.89
1999-2000 1.09 1999-2000 +8.23
2000-2001 1.14 2000-2001 +7.45
2001-2002 1.17 2001-2002 +4.62
Change 1998-2002 (+15.80%)
Cash Bonuses &
Incentives
1998-1999 0.80
1999-2000 0.94
2000-2001 0.87
2001-2002 1.69
% Change 1998-2002 (+111.25%)
Total Cash Remuneration Average Share Price
Change
1998-1999 1.82 1998-1999 +13.75
1999-2000 2.04 1999-2000 +3.50
2000-2001 2.13 2000-2001 +2.93
2001-2002 2.86 2001-2002 +0.83
% Change 1998-2002 (+57.14%) % Change 1998-2002 +21.01
Value of Shares Held+
1998-1999 3.68
1999-2000 4.30
2000-2001 4.59
2001-2002 6.25
% Change 1998-2002 (+69.83%)
Gross Value of Options
Held++
Average Change in
Earnings Per Share
1998-1999 18.44 1998-1999 N/A
1999-2000 25.62 1999-2000 +18.08
2000-2001 32.68 2000-2001 +5.39
2001-2002 35.12 2001-2002 -2.94
% Change 1998-2002 (+90.46%) % Change 1998-2002 +20.53
# Banks represented: NAB, Westpac, ANZ, CBA, Macquarie, St George, Bankwest, and Suncorp-Metway..
+ Total share ownership as disclosed in most recent annual report multiplied by company’s closing share price at end
of year.

43
++ Total number of options held as disclosed in most recent annual report multiplied by company closing share
price at start of year.
Source: AFR, 1 November 1999, 16 November 2000, 16 November 2001, 6 November 2002.
It could be argued that the banks have continued to return positive (albeit diminishing) growth on
these performance dimensions and have remained a low risk ‘safe haven’ for investors since the
end of the share price boom. Yet, in itself, this does not justify the disproportionate rise in
executive remuneration levels in this industry.
4.6 Profits versus Social Responsibility
These findings must also be placed in the context of wider stakeholder interests, including those of
customers and ordinary employees. The banks have arguably undertaken cost-cutting measures that
have had a deleterious impact on customer satisfaction and employee morale. For example, from
1993 until 2000 the four major banks have also closed over 1900 branches combined. (FSU
Website, ‘Staff and customers pay for bank profits says reserve bank study’, 1 March 2000, 1).
Between 1993 and 2001, the number of branches was reduced by 454 at ANZ, by 703 at CBA, by
352 at NAB and by 449 at Westpac (FSU website).
17
In addition, according to the Financial Sector
Union, between 1991 and 2001 some 55,497 jobs have been lost in the industry. Exhibit 4.4 details
the extent of job losses in the ‘big four’ since 1991.
Exhibit 4.4
Jobs Lost in the Major Banks, Australia, 1991-2002.
Bank 1991 2001 Jobs lost
ANZ 30,433 16,152 -14,281
Westpac 37,304 19,848 -17,456
CBA 46,597 28,837 -17,760
NAB 22,000 16,000 -6,000
Total 136,334 80,837 -55,497
- NAB employment totals are FTE estimates based on figures provided to FSU from National. They differ from
those set out in National Annual report and exclude ex-MLC employees
- 1991 employment numbers drawn from Affirmative Action Agency reports.
- 2001 figures sourced from company reports (except National)
- Westpac figures based on 2001 Annual report and subsequent figures provided to FSU from Westpac.
Source: FSU Website, (2001). ‘Jobs lost in major banks’.
On December 13 2001 Westpac, NAB and ANZ workers participated in the first coordinated
industrial action between the major banks. ‘The action had been called to draw attention to the
declining levels of customer services caused by branch closures and staff cuts, while banks make
billions of dollars in profits’ (Bosswatch, ‘Unprecedented action by bank workers, 11 November
2001, 1).
The consequence of closing branches and job cuts is that the remaining employees experience
expanding workloads: ‘Research conducted by the Finance Sector Union found that the amount of
overtime work of bank staff had increased three-fold over the past 14 years’ (Adam, 2002). The
following information was taken from the Financial Sector Union Website.
17
The figures are taken from a FSU table labeled branch closures. It appears however that the
figure is the difference between the number of branches at the beginning and end of the
year. Thus, it includes the number of new branches opened as well as the number that have
closed.

44
Who usually works overtime?
• 47 percent of males said they usually work overtime (62,900 out of 134,200)
• 27 percent of females said they usually work overtime (51,500 out of 187,600)
• 36 percent of the total Finance and Insurance workforce usually work overtime (114,400
out of workforce total of 321,800)
Are they paid for their overtime?
• 39 percent of those doing overtime were not paid for it (44,200 did unpaid overtime)
• 32 percent said it was included in their salary package (36,800)
• 21 percent were paid for their overtime (24,300)
• 6 percent received time off in lieu (6,400)
• 2 percent had some other arrangement for compensation (2,700)
According to the FSU a total of 986,900 hours of overtime are worked each week in the finance
sector, 39 percent of which remains unpaid. These unpaid hours total 384,891 hours, which
translates into the banks saving approximately $AU5 million per week
18
(FSU Website. ‘Hours of
work in the finance sector’, 2002).
For these reasons, O’Neill and Perry argue, with considerable justification, that a more appropriate
approach to allocating short-term incentives for executives would be to emphasise a Balanced
Scorecard approach whereby the executive is measured not solely against narrow financial
performance criteria, but also against ‘…customer satisfaction, employee satisfaction and
motivation, process improvement, corporate reputation and strategic development’ (2002, 237).
4.7 Conclusions
This case study of executive pay in the major Australian banks casts doubt on the assumption that
the levels of cash and equity wealth enjoyed by the CEOs of the major banks are justified in terms
of improvements in bank financial performance. Indeed, in terms of performance measures that
better reflect shareholder value, this is not the case. The Australian Financial Review data points to
the existence of a divergent trend between Bank CEO remuneration, including cash, shares and
options, and widely recognised measures of financial performance, including ROE, share price
change and earnings per share.
The excessive nature of executive remuneration provided by the banks is compounded by the lack
of information provided regarding the targets that executives have to meet to receive either short-
term or long-term incentives. The only information provided are statements to the effect that more
stringent criteria have been developed whereby executives have to perform to at least the median
level of peer companies before 50 per cent of available stock options can be vested. Rather than
containing the spread of stock option grants, such criteria may led to a significant increase in the
number of options made available to executives to match their expectations of financial rewards. In
addition, none of the four major banks expense the cost of stock options in their financial
statements, they even go so far as to claim that they have a nil value under existing accounting
standards. This is despite the substantial sums options cost the banks, such as the $AU72 million
18
The $AU5 million in lost wages is calculated using the lowest rate for a bank worker of
$AU14.90 an hour.
$AU14.90 is an hourly rate based on the lowest base salary (ANZ) of
the four banks’ current enterprise agreements. Based on average weekly earnings for the
sector the amount would be closer to $AU10 million per week

45
outlined in the NAB Annual Report (2002) and the $AU48 million noted in the Westpac Annual
Report (2002). Moreover, the high levels of payments to executives in the banks on the termination
of their employment contracts supports moves by the Australian Stock Exchange for more timely
disclosure of the details of executive employment contracts at the time they are negotiated.
The study also draws attention to the enormous gap between the payments provided to CEOs
compared to the level of pay provided to bank customer service staff. The ratio of CEO pay to that
of customer service staff (188:1) is over two and a half times the level evident across all industries
(74:1). The banks’ soaring profits performance in recent years and concomitant record of over
55,000 job losses (between 1991 and 2001) and over 1,900 branch closures (between 1993 and
2000) also suggests that executive rewards are linked to an overly narrow focus on financial criteria
to the detriment of the banks’ broader social responsibilities to their customers and staff. One
means of addressing this would be to link executive rewards to a Balanced Scorecard approach that
also measures customer expectations and staff morale and job satisfaction.

46
CHAPTER 5
Options for Reform
There is now widespread agreement across many sectors of Australian society that executive pay is
out of control and that existing reporting requirements and regulatory mechanisms are inadequate to
the task. The evidence presented in this report suggests that existing executive remuneration
practices are defensible neither in terms of distributive justice nor organisational effectiveness.
What, then, can be done? Within the scope of a liberal democratic system, the options for reform
and remedy open to the trade union movement would seem to fall into three main areas:
1. Legislative enactment, principally through the Corporations laws;
2. Legislative enactment through the taxation system;
3. Through peak unions, such as the Labor Council of New South Wales and the ACTU, making
common cause with other bodies seeking change in the areas of corporate governance and
executive remuneration
The report’s key recommendations are as follows:
1. Governments should use their purchasing policy to encourage firms with moderate executive packages.
Governments currently consider a range of issues when considering a contract or tender, including
environment impact, economic impact, compliance with affirmative action requirements and, in the
case of NSW, labour relations. Similarly, executive pay levels could also be considered when
awarding government tenders and contracts, with recognition that pay relativities above a
performance optimal range (See Chapter 3, Section 2) are less likely to deliver a good return for
shareholders or the taxpayer. The use of government purchasing policy to affect behavioural
change offers companies that comply a clear incentive for altering their corporate practices.
2. Create a fully independent regulatory body with power of enforcement.
The formation of the Corporate Governance Council in 2002 and the development of the Australian
Stock Exchange’s (ASX) Principles of Good Corporate Governance (Sydney Morning Herald, 1
April 2001) represent a belated acknowledgement in business circles of the ‘problem’ of executive
pay determination. The ASX’s attempts to promote good practice within a framework of self-
regulation are certainly to be welcomed. Arguably, however, such activities also serve a defensive
purpose. The promotion of voluntary codes of best practice is designed, in part, to head off further
legislative regulation. Self-regulation also has its own inherent shortcomings. Since the ASX is
itself a privately listed company, its regulatory functions are necessarily compromised. These
functions should be transferred to a fully independent entity such as the Australian Securities and
Investments Commission.
3. Restrict the use of share grants and share options.
The total number of options and shares granted to hired executives should be capped so as not to
exceed a specified proportion of the number of shares in the company’s issued capital. This would
have the effect of limiting the dilution of ordinary shareholder wealth and the scope for the abuse of
option plans. Guidelines laid down by the shareholder bodies like the Australian Shareholders
Association, the Australian Investment Managers and the Australian Institute of Company
Directors propose a cap of 5 percent here. At the same time, a statutory minimum vesting period of
three years should be applied to all new option plans so as to minimise the potential for financial
manipulation

47
4. End taxpayer subsidy of executive pay and perks.
An enforceable limit should be placed on ‘reasonable business expenses’ for the purposes of
taxation deductions. A limit should also be placed on the capacity of companies to use non-
monetary compensation mechanisms to avoid income tax. This may also require amendment of the
taxation regime applicable to family trusts to limit the capacity of directors, senior executives and
companies using this means to minimise tax.
As the US experience demonstrates, what is required is substantially more than a simple cap on the
deductibility of the fixed or cash component of executive pay. The US Congress limited
deductibility to a maximum of $US1 million in 1993 but performance-based payments were
excluded from the limit and, as a consequence, companies turned increasingly to incentive plans,
including options, to circumvent the limit.
19
The fact that the effective rate of capital gains tax is half that of the highest marginal rate of
personal income tax gives executives and remuneration consultants further incentive to accentuate
the use of options and share grants as opposed to cash. The argument that hired executives should
not be treated any differently here to ordinary shareholders is fallacious since such executives
receive options and share grants by virtue of their status as employees of the company rather than
as private investors. To address this issue, tax law should be amended to require the payment of
income tax on share grants and the fair value new option grants, taking into account the vesting
periods involved. So as not to inhibit share ownership by ordinary employees, the existing tax free
threshold for share grants of up to $1,000 could be increased substantially, to say $10,000.
5. Require that executive termination payments providing benefits in excess of those available to
other company employees should be approved by shareholders within twelve months of hiring of
the new executive.
One of the main reasons for the astronomical sums paid out to departing CEOs is the fact that
severance benefits are rarely negotiated at the point of hire, which means that failed executives are
able to coerce massive additional payments in exchange for going quietly. Termination and other
one-off payments should be written into contract of employment (subject to shareholder approval)
and subject to full and immediate disclosure.
6. Action, including legislation, to make superannuation funds more accountable for executive
pay decisions.
As some of the largest institutional investors in the country, superannuation funds should be
required by law to provide information to their members how its nominees on boards have
participated in decisions on executive pay in listed companies. This provision could begin in public
and occupational superannuation funds and be extended to private superannuation and investment
funds. This would require legislative action at the state and federal level.
At the same time, the role of union and employee nominees in industry and public superannuation
funds provides an opportunity for the union movement to both influence the public debate and
promote appropriate regulation. Public sector superannuation funds are often important sources of
19
In this respect, the authors believe that ACTU’s submission to the Senate Economics
Committee Inquiry into the Corporations Amendment (Repayment of Directors’ Bonuses)
Bill 2002, which included a recommendation for the removal of tax deductibility of
remuneration packages exceeding $AU1 million, is problematic. At the very least, the
deductibility cap should apply to the fair value of executive remuneration from all sources,
including option and share grants made during the relevant year.

48
capital for business, as are industry funds. Unions, then, should make it a priority to ensure that
its investment power is used to promote good practice and to ensure that directors of companies in
which the public and industry funds have significant investments are aware of the principles that
underline good practice.
Through its public sector union affiliates the Labor Council may be able to exercise more leverage
in state-based superannuation funds. At the national level, the Council should urge the ACTU to
take a more active role in this area as well as lobbying large national unions who have nominees on
industry funds to take a more interventionist stance in relation to corporate governance and
executive remuneration.
An immediate step would for the union movement to become more engaged with the Australian
Council of Super Investors - the peak body of industry superannuation funds. Its recent report
Corporate Governance Guidelines for Superannuation Fund Trustees and Corporations advocate
principles and practices are consistent with the general direction of the recommendations listed
above. More formal interaction with the Association of Superannuation Funds of Australia may be
assistance to the union movement in this area.
7. Legislate to require that all organisations providing commercial services in the field of
executive remuneration within Australia be registered and subject to full reporting requirements.
Given the role played by remuneration consultants in the determination of executive remuneration
practices and levels it is appropriate that the role of such organisations themselves be made subject
to greater public scrutiny. Executive remuneration consultants should be required to report annually
to relevant statutory authorities (such as the Australian Securities and Investments Commission and
the Australian Competition and Consumer Affairs Commission) on their activities. Further, where
any listed company draws on advice from an external consulting organisation in determining
executive pay levels and composition, it should be a statutory requirement that all reports
commissioned by such external consultants be made available in full to shareholders of the
company at the time of submission and at the next Annual General Meeting.
8. Strengthen corporate governance requirements relating to executive remuneration and board
independence.
The setting of executive remuneration falls within the overall framework of corporate governance.
It is therefore necessary that the Corporations Act be amended to ensure:
• that the legislated responsibilities of directors of publicly listed companies include specific
responsibilities to stakeholders (including employees);
• that a majority of directors in publicly listed companies are independent directors;
• that companies are required to constitute ‘arms-length’ remuneration committees to determine
and report on executive remuneration;
• that a majority of members of the remuneration committees of publicly listed companies be
independent, non-executive directors serving on a rotating basis;
• that the chair of the remuneration committee be an independent director; and
• that there be a statutory limitation on the number of directorships that can be held by non-
executive directors in publicly listed companies.
9. Introduce more stringent disclosure, reporting and shareholder approval requirements.
The assumption that the terms of executive employment contracts are commercial-in-confidence
and inviolate should be subject to legislative review. In the same way that worker and their unions
are required to furnish detailed evidence in support of adjustment in national minimum wage and
award wage rates, so shareholders, employees and the general public are entitled to the provision of
full information on the level and composition of senior executive pay and on the rationale behind

49
the amount paid and any change in pay level, composition and payment mode. Toward this end,
it should be mandatory for each listed company to fully detail the remuneration level and structure
of all directors and the ten most highly remunerated executives who are not directors, including fair
valuation of all unexercised option holdings. This information should identify each individual
concerned.
Corporations laws should be amended to require formal shareholder approval for all
recommendations and decisions by remuneration committees in relation executive directors and the
top ten salaried executives. To minimise the potential for non-compliance, the requirement for
shareholder approval should not be limited to a disaggregated list of specified remuneration
components; rather, the requirement should be global in scope, covering all reward elements and
the combined total of these elements.
In addition, existing regulations requiring boards to ensure that remuneration is ‘reasonable given
the circumstances of the company’ (O’Neill and Berry, 2002, 242) should be strengthened to
require full justification of all changes in total remuneration in relation to terms of such factors as:
company size; relevant labour market pressures and trends, and recent and projected company
financial performance, as well as the interests of other key stakeholder, particularly employees,
customers, taxpayers, and institutional and non-institutional shareholders.
Further, listed companies should be required to provide more detailed comparative information
about executive remuneration in their annual reports. Specific comparative information might
include:
• changes in the ratio between the highest and lowest paid company employee;
• the growth or decline in employment within the company;
• benchmark comparisons of executive remuneration in peer group companies (eg banks; telcos,
large retail companies);
• comparison of changes in total remuneration payment to the 10 highest paid executives over the
previous three years with changes in a specified set of organisational performance measures
over the same period. Performance measurement should include a balance of accepted financial
measures (e.g. earnings per share, total shareholder returns, return on equity) and non-financial
indicators (e.g. employee and customer satisfaction; employee retention/turnover; change in
market share.)
Listed companies should also be required to provide more comprehensive information on the use
and impact of share options and share based incentive schemes in their annual reports. Such
information should include:
• the number and type of shares / options available for issue, the associated vesting periods, and
the number actually issued;
• the exercise price of share options or the method of determining it;
• details of any interest-free or low-interest loans provided to individual executives for share
purchase and how these are funded;
• the basis of any performance hurdles applied to cash or share bonuses and option grants,
justification of the performance measure/s chosen, and an explanation of the association
between the measures used and any bonuses paid;
• the estimated cost to the organisation of all unexercised employee option plans and the
incorporation of this expense in company income and expenditure statements and balance
sheets.

50
• the estimated fair value of unexercised option holdings to individual executives using a
standard valuation method. This could be achieved by the mandatory adoption of international
accounting standards in this area
20
;
• estimates of the dilution effect of options exercised;
• details of all share buy-back activities undertaken by the company during the reporting period
and the reasons for each buy-back.
In addition, companies should be required to adhere to ‘real-time’ disclosure. There should be
immediate disclosure of the key terms of executive contracts, including termination payments. This
should include immediate public notification
**********
The above recommendations involve significant legislative change and their implementation will
therefore require considerable political and ethical will. They also highlight the limitations of ‘self-
regulation’. While it is unlikely that the current federal government would readily increase
regulation in this area, the level of public concern about the issues of executive remuneration and
corporate governance generally is such that it would be politically unwise for the government to
totally ignore the matters of concern. There is also growing disquiet in the corporate world about
this issue. The central point is that executive pay is far too important an issue to be left solely to
corporate boardrooms, the remuneration consultants, and the self-regulators. If the level of wages
paid to ordinary employees is rightly a matter of social and economic interest, then so too are the
stratospheric sums paid to those at the top end of the corporate hierarchy.
20
The fair and realistic valuing of option holdings is necessarily a problematic process, since
it is reliant on share price projections and other uncertainties. The estimation of probability
becomes all the more complex where performance hurdles, which may or may no be
achieved, are involved. For these reasons there is considerable debate about the most
appropriate valuation model. In the USA, the referred approach is the Black-Scholes model.
However, where performance hurdles apply, Black-Scholes will often over-estimate the
value of the option. For reporting purposes, the objective should be to legislate to ensure the
consistent application of an accepted method.

51
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58
STATISTICAL APPENDICES
Key:
$ Base Base salary, superannuation and benefits.
$ Bonuses Bonuses and other cash incentives.
$ Total Total cash remuneration for the relevant year: The sum of 1 & 2.
$ Change Annual percentage change in total cash remuneration.
Shares Number of company shares held at close of relevant year.
Share $ Market value of company shares held at the close of the relevant year multiplied by the company’s share price at the relevant year.
Options Number of unexercised share options held at the commencement of the relevant financial year.
Option $ Gross value of unexercised options held, i.e. the number of unexercised options held multiplied by the company’s share price at the
commencement of the relevant year.
Capital The company’s market capitalisation at the end of the relevant year,
ROE Return on equity for the relevant year. i.e. profit, net of significant items, expressed as a percentage of shareholders’ equity
% SPC Percentage share price change. ie. the percentage change in the company’s share price over the relevant year.
% PG Percentage growth in reported pre-tax profits as compared with previous year.
% EPSC Percentage change in diluted earnings per share as compared with previous year.

59
Appendix 1
Australian Financial Review Executive Remuneration Survey Data, 1989-1999
Source: Australian Financial Review, 1 November 1999, 26-27.
Selection Criteria: Australian-based Chief Executive Officers, Managing Directors, General Managers, Executive Chairpersons and ‘Chairmen’ of the
Australian Stock Exchange ‘Top 150’ public companies, excluding property and other trusts. Foreign dual-listed companies not disclosing executive
remuneration also excluded.
COMPANY EXECUTIVE $ BASE $ BONUSES $ TOTAL $ CHANGE SHARES SHARE $ OPTIONS 0PTION $ CAPITAL ROE % SPC % PG
News Corp P Chernin 4849779 13934216 18783995 105.50 0 0 6450000 69853500 42435 4.00 -2.20 -40.1
Westfield Holdings FP Lowy 898638 6739880 7638518 18.40 164380239 1425176672 0 0 4541 25.70 17.50 23.2
AMP GR Trumbull 1897000 3050000 4947000 26.80 15896 239076 0 0 16317 12.90 -12.60 15.7
Coles Myer D Eck 2349307 1792596 4141903 7.90 651082 5124015 6000000 47220000 9104 16.80 39.50 10.1
GIO SH Steffey 536358 3187611 3723969 25.40 1884 -164.10 -2.20 -96.0
Macquarie Bank AE Moss 498459 3184111 3682570 39.00 474857 9881774 601371 12514531 2164 12.00 21.50 66.0
Aristocrat DH Randall 1164019 1980000 3144019 85 1262 500000 7425000 1557 40.00 201.00 25.0
Leighton Group WM King 1610841 1500000 3110841 39.60 6660 39760 600000 3582000 1564 19.90 4.30 18.0
Village Roadshow PA Zielger 3101805 0 3101805 -3.60 57200 156156 0 0 722 2.70 -9.90 -61.2
National Mutual GA Tomlinson 2387228 334335 2721563 119.70 0 0 1275000 2690250 3771 5.10 -33.60 -31.7
NAB DR Argus 1706908 1000000 2706908 26.50 59612 1335905 1600000 35856000 33302 17.90 17.30 9.4
Westpac RL Joss 1402390 1000000 2402390 24.50 1416667 13529170 5433334 51888340 17690 14.70 -.05 7.9
BHP PM Anderson 2340181 0 2340181 104000 1794000 1900000 32775000 29997 4.20 28.20 -5.3
Rio Tinto LA Davis 1732750 351330 2084080 27.50 155220 2245131 285963 7037549 14818 10.10 29.00 -32.2
Fosters Brewing ET Kunkel 1329216 747964 2067180 4.90 238185 1036105 2400000 10440000 7525 13.70 12.10 -17.4
Brambles JE Fletcher 1582000 417000 1999000 4.20 148000 6438000 225000 9787500 9892 18.60 25.90 16.3
CSR P Kirby 1386900 600000 1986900 41660 145810 500000 1750000 3639 8.70 -7.30 420.0
Wesfarmers MA Chaney 1018000 921000 1939000 22.80 600427 7181107 0 0 3211 15.10 13.30 8.1
PBL NG Falloon 1301179 630000 1931179 -11.80 1050000 9082500 0 0 5633 6.60 43.40 -63.5
Qantas J Strong 1260522 654900 1915422 10.10 109196 538336 0 0 5942 14.00 105.30 38.3
CC Amatil DL Kennedy 1382759 500000 1882759 27.20 201000 986910 400000 1964000 5010 4.30 -9.60 13.9
Spotless Group BC Blythe 551125 1286664 1837789 18821671 99001989 0 0 803 23.40 22.30 36.6
ANZ J McFarlane 1200000 560000 1760000 109.50 302000 3013960 1000000 9980000 15622 14.60 -.02 8.0
CBA D Murray 1265700 450000 1715700 33.50 44372 1075134 800000 19384000 22356 16.10 27.60 30.5
Pioneer International Jm Schubert 1097247 600000 1697247 23.90 160000 557280 2000000 6966000 2868 11.10 .00 24.3
Woodside Petroleum JH Akehurst 1499508 92400 1591908 13.80 397520 3951349 0 0 6626 20.60 26.90 9.2
Santos NR Adler 1284136 300000 1584136 4.20 855000 3514050 2500000 10275000 2491 9.10 -1.00 -14.5
Tabcorp IR Wilson 1303625 254305 1557930 1.90 3926000 39652600 0 0 3071 21.50 28.50 18.2

60
Lend Lease DH Higgins 1092691 463883 1556574 -20.60 82161 1487114 0 0 9220 12.10 28.00 15.5
FH Faulding ED Tweddle 1055614 490210 1545824 40.70 614100 5895360 360000 3456000 1546 10.10 24.90 37.6
Amcor RH Jones 1187390 290000 1477390 13.60 100000 685000 700000 4795000 4365 10.40 18.70 462.2
Seven Network GW Rice 1016087 459895 1475982 64.20 0 0 0 0 1141 6.20 -8.80 -53.0
HIH Insurance RR Williams 1460350 0 1460350 44.70 10336383 14574300 500000 705000 652 11.50 -34.30 268.3
Mayne Nickless RR Dalziel 1082949 375000 1457949 22000 91960 600000 2508000 1431 40.80 -31.50 16.1
Colonial Group PJ Smedley 1038000 395200 1433200 6.20 30090 1692272 3000000 17070000 5281 10.30 9.60 34.8
Goodman Fielder DLG Hearn 1419513 0 1419513 -15.00 5000000 7050000 9000000 12690000 1792 1.60 -42.60 85.0
AGL LF Bleasel 1300000 80400 1380400 6.20 673483 5859302 0 0 2860 15.20 -9.00 12.7
WMC HM Morgan 1117714 255350 1373064 5.70 220000 1568600 900000 6417000 8147 5.90 33.50 -9.5
Southcorp GJ Kraehe 1045293 321028 1366321 5.10 190105 1064588 1000000 5600000 3467 13.10 30.10 -84.6
James Hardie RK Burton 1005337 360000 1365337 18.80 275637 1062581 0 0 1571 14.60 -11.30 13.0
Howard Smith KJ Moss 1039000 311000 1350000 53.40 304557 3371446 214000 2368980 2164 12.00 21.50 68.0
Boral AR Berg 1156250 179000 1335250 2.00 755856 1814054 3500000 8400000 2707 7.50 -15.50 13.5
C&W Optus CJ Anderson 966098 300000 1266098 7.40 44621 157958 241500 854910 13360 -17.20 29.80 91.5
Futuris Corporation AL Newman 1218868 0 1218868 -29.90 9922254 19546840 6000000 11820000 1117 11.60 54.90 20.0
Suncorp Metway WS Jones 951921 243000 1194921 50300 571692 2000000 16280000 2476 12.70 29.90 11.0
Telstra ZE Switkowski 700836 473000 1173836 67120 518166 0 0 59881 29.90 57.60 16.1
Woolworths RC Corbett 885659 282480 1168139 -1.80 70165 372576 319000 1693890 6121 21.90 -4.20 8.0
Foodland BJ Alty 903116 108127 1083243 19.00 225000 2081250 150000 1387500 870 7.70 -1.50 83.0
Normandy Mining RJ de Crespigny 981000 88000 1069000 9.20 92140745 110568894 0 0 2086 10.30 -23.70 24.0
Anaconda Nickle JAH Forrest 640568 367500 1008068 13.40 30533000 65035290 4000000 8520000 705 1.40 33.00 32.4
Pacific Dunlop RL Chadwick 888398 88839 977237 9.80 621400 1367080 1800000 3960000 2261 12.20 -16.40 13.7
AAPT LF Williams 665222 303750 968972 4.30 179500 879550 2000000 9800000 1465 10.10 51.60 275.9
One.Tel JD Rich 427772 500000 927772 32943311* 36896508* 61665165* 69066665* 1986 3.60 280.60 18.6
One.Tel B Keeling 427772 500000 927772 32943311* 36896508* 61665165* 69066665* 1986 3.60 280.60 18.6
MIM Holdings NW Stump 888880 35000 923880 6.20 32098 40764 0 0 2163 -2.30 37.10 -162.3
National Foods MG Ould 715263 180000 895263 -2. 1115980 3057785 2000000 5480000 751 12.90 -3.00 11.0
Smorgan Steel RK Horsburgh 701479 181073 882552 88258 187107 1025373 2173791 1600 5.40 1.80
QBE Insurance FM O'Halloran 876800 0 876800 823043 5218093 140000 887600 2458 12.20 .90 30.0
Newcrest Mining GT Galt 663082 203000 866082 94.60 0 0 750000 3232500 1041 5.30 62.30 100.2
GWA International GJ McGrath 625426 227500 852926 .30 654275 1668401 0 0 699 12.70 8.50 22.4
ASX RG Humphrey 560888 289500 850388 39.60 0 0 0 0 907 19.40 155.70 55.0
Pasminco DM Stewart 801491 32631 834122 8.50 26029 36701 950000 1339500 1585 -.10 35.60 -48.0
Comalco WT Palmer 613413 210000 823413 19.50 0 0 0 0 4271 14.20 15.50 7.2
Solution 6 CS Tyler 613844 177994 791838 55.60 5400 37260 5012100 34583490 581 2.80 253.70 796.0
North MW Broomhead 715778 50000 765778 16.20 11000 35420 307500 990150 2468 -2.00 -7.80 -126.0
Jupiters RK Barnes 567000 183000 750000 39.10 127605 422373 0 0 798 8.40 48.70 18.3
Pacifica Group BJ Jackson 599060 150000 749060 29.40 31040 178480 550000 3162500 838 5.20 67.50 -2.0
Perpetual GJ Bradley 748080 0 748080 -8.80 53811 1076220 64407 1288140 730 22.60 71.00 22.4
George Weston JH Pascoe 738801 0 738801 2.80 6310 41709 0 0 716 6.30 -14.40 -6.5

61
Fairfax FG Hilmer 736417 0 736417 200000 780000 3500000 13650000 2837 18.30 60.30 -78.7
ERG PR Fogarty 657500 75000 732500 6.30 5204748 32165343 1250000 7725000 1285 8.80 155.00 47.0
Email RG Waters 676458 55502 731960 55.70 106100 286470 700000 1890000 733 7.70 3.80 80.0
WA Newspapers DW Thompson 598611 100000 689611 14.70 460653 2404609 0 0 1151 37.30 10.50 -9.7
CSL BA McNamee 500000 180000 680000 23.90 435760 8070275 420000 7778400 2453 11.80 24.80 16.0
Lihir Gold M Merton 674754 0 674754 25.70 1000 1290 0 0 1397 -1.10 -42.70 -187.0
Caltex ID Blackburne 669655 0 669655 30000 78300 0 0 704 8.30 -14.90 -14.0
United Energy KG Stamm 598655 61970 660625 16.10 30000 62400 0 0 866 10.50 26.90 56.0
Bankwest TC Budge 628493 0 628493 10.50 8678 34365 400000 1584000 1989 17.20 13.30 28.5
Orica PL Weickhardt 550000 70500 620500 11.00 14752 120081 287500 2340250 2223 31.30 -13.60 -23.6
Mirvac Group RJ Hamilton 565541 50003 615544 31.20 12358991 39178001 0 0 1691 8.10 10.2
BRL Hardy SB Millar 468759 102940 571699 21.90 266217 1863519 303200 2122400 981 14.40 23.10 27.0
TAB W Wilson 432107 120000 552107 771 2051 0 0 1330 10.60 28.10 8.0
APN News & media AC O'Reilly 550688 0 550688 -1.70 1500000 4605000 1200000 3684000 749 10.00 22.30 15.0
Transurban K Edwards 438939 80000 518939 13.10 100 176000 0 0 1601 39.40
Incitec JF Babon 382800 100000 482800 12.50 1000 5550 0 0 669 12.30 9.60 -27.0
Rural Press BK McCarthy 475046 0 475046 10.50 123577 589129 0 0 803 13.70 6.90 -35.7
Cochlear CB Livingstone 369340 100564 469904 14.90 67000 1139000 228000 3876000 868 49.40 83.60 23.0
St George Bank EA O'Neal 439000 0 439000 -60.10 500 5070 0 0 4683 13.90 .50 -2.2
Stockland trust PJ Daly 339678 33897 373575 13.50 1729758 5673606 0 0 1386 9.80 -6.50 5.7
Iluka Resources MH Macpherson 354787 17980 372767 16.90 5083 19112 1500000 5640000 837 .70 -2.50 -82.7
Acacia Resources GM Folle 361530 0 361530 -41.70 63000 173250 2490476 6848809 693 9.60 1.00 -64.8
Computershare CJ Morris 330000 0 330000 3.40 13464988 72037686 0 0 2546 12.30 218.00 131.0
Coal & Allied KT Tronson 280611 40000 320611 28.80 0 0 0 0 1298 22.10 107.10 525.3
Argo Investments RJ Patterson 300648 0 300648 7.40 392770 1370767 0 0 1004 19.60 12.10 25.7
WH Soul Pattinson PR Robinson 288000 0 288000 3.20 7321 281859 0 0 918 9.20 32.10 15.6
Flight Centre GF Turner 89055 186565 275620 45.80 16870000 227745000 0 0 1884 49.30 140.50 52.0
Harvey Norman G Harvey 250400 0 250400 4.30 328082050 1030117637 0 0 3197 21.70 73.50 39.1
Challenger Internatonal WEB Ireland 174960 16941 191901 1.50 24161016 98335335 720000 2930400 694 60.40 589.50 40.0
Hills Motorway WR Clark 149475 0 179475 116.60 638 .20 56.40 79.9
South Pac Petrol JA McFarlane 176197 0 176197 18.30 2005000 5573900 0 0 851 -1.00 12.50 .5
AFIC BB Teele 66000 0 66000 954639 2825731 437500 1295000 2099 5.40 6.50 13.0
* Figure adjusted to reflect average individual ownership.

62
Appendix 2
Australian Financial Review Executive Remuneration Survey Data, 1999-2000
Source: Australian Financial Review, 16 November 2000, S8-S9.
Selection Criteria: Australian-based Chief Executive Officers, Managing Directors, General Managers, Executive Chairpersons and ‘Chairmen’ of the
Australian Stock Exchange ‘Top 150’ public companies, excluding property and other trusts.
COMPANY EXECUTIVE $ BASE $ BONUSES $ TOTAL $ CHANGE SHARE NO. SHARE $ OPTIONS 0PTION $ CAPITAL ROE % SPC % EPSC
News Corp P Chemin 6742770 15816210 22558980 20.1 0 0 12600000 268002000 41805 3.90 78.40 17.9
News Corp KR Murdoch 8624429 3805175 12429604 3.1 624067880 13273923808 24000000 510480000 41805 3.90 78.40 17.9
Westfield Holdings FP Lowy 768310 7695200 8463510 10.8 161610259 2073459623 0 0 6570 23.20 24.00 15.3
One.Tel JD Rich 565000 6904000 7469000 705.0 34831227* 24730171* 44000000 31240000 1538 -27.30 8.90 -2838.5
One.Tel B Keeling 562000 6904000 7466000 704.7 34831227* 24730171* 29500000 20945000 1538 -27.30 8.90 -2838.5
BHP PM Anderson 1625000 5844239 7093239 203.1 304000 5700000 1700000 31875000 33680 17.10 12.90 444.5
Macquarie Bank AE Moss 1211644 3841368 5053012 37.2 474857 13865824 716371 20918033 4997 28.10 27.80 22.7
Lend Lease DH Higgins 2314243 2500000 4814243 209.3 83841 1743893 75000 1560000 9473 81.20 3.50 2.8
Securenet G Ross 4509674 0 4509674 1480000 14060000 1150000 10925000 654 2.70 560.93 15.8
Coles Myer D Eck 2650000 1850000 4500000 8.6 651523 4743087 7000000 50960000 8243 10.90 -27.00 8.6
Boral AR Berg 4109620 0 4109620 207.8 0 0 0 0 1102 13.60 12.60 14.8
Leighton Group WM King 1681510 1700000 3381510 8.7 6660 42691 600000 3846000 1700 21.00 -8.80 9.7
Tabcorp IR Wilson 1897192 796598 2693790 72.9 3926000 43107480 3000000 32940000 3996 18.80 -5.70 6.3
Normandy Mining RJ de Crespigny 2667000 0 2667000 149.5 94384924 88721829 0 0 1676 -25.30 -10.50 31.0
PBL NG Falloon 1701356 900000 2601356 34.7 1500000 20820000 0 0 8471 9.00 28.90 50.7
Wesfarmers MA Chaney 1055000 1419000 2474000 27.6 604138 9140608 0 0 3878 17.00 -2.20 52.0
Westpac DR Morgan 1135807 1300000 2435807 41.5 734732 9904187 3675000 49539000 23299 16.90 23.00 15.3
AMP P Batchelor 1332000 1099000 2431000 1500 271500 0 0 19058 -4.60 2.90 .2
Mayne Nickless RR Dalziel 2299227 125000 2424227 66.3 0 0 0 0 1808 -17.60 -33.70 -30.6
C&W Optus CL Anderson 1431230 978605 2409835 90.3 147657 2923241 139682 11856046 15624 5.90 44.80 2433.3
Rio Tinto LA Davis 1769670 590146 2359816 13.2 57480 1572653 204941 5607186 13784 18.00 11.50 85.7
Aristocrat DH Randall 2126657 200000 2326657 -26.0 85 544 250000 1600000 2565 28.20 97.38 -30.0
Village Roadshow JR Kirby 1781539 521605 2303144 1.5 111826723 199051567 0 0 405 6.40 -12.90 -3.3
Austar JC Porter 2266485 27143 2293628 280000 1033200 4600850 16977137 1918 23.90
Fosters ET Kunkel 1411139 865730 2276869 10.1 2000 9240 0 0 8322 18.80 10.40 17.1
AGL LF Bleasdel 1492177 774200 2266377 64.2 684847 8053801 0 0 3997 27.40 8.30 15.8
CSR P Kirby 1322800 933500 2256300 13.6 208780 843471 500000 2020000 3958 13.30 7.40 34.2
Qantas J Strong 1336705 763152 2099857 9.6 119404 463288 1110000 4306800 4638 17.50 -32.30 20.9
CBA D Murray 1360140 685000 2045140 19.2 50387 1506067 1000000 29890000 37159 22.30 15.10 20.9
Newcrest Mining GT Galt 2013203 0 2013203 132.4 0 0 250000 920000 903 1.00 32.70 -540.0

63
Spotless Group BS Blythe 761367 1224275 1985642 8.0 19943468 140402015 0 0 1196 14.00 38.20 -2.9
NAB F Cicutto 1371408 550000 1921408 22.0 39647 1129940 1300000 37050000 41179 18.10 11.60 13.2
Goodman Fielder DLG Hearn 1410287 433700 1843987 29.9 5000 6250 9000000 11250000 1569 6.60 -7.50 24.1
Brambles JE Fletcher 1660000 146000 1806000 -9.7 148000 7195760 365000 17746300 11647 19.30 23.00 9.6
Anaconda Nickel JAH Forrest 1781491 0 1781491 76.7 31030238 97434947 8000000 25120000 1154 -1.30 10.00 523.1
Woodside AH Akehurst 1506068 247822 1748890 9.9 429690 5878159 0 0 9336 20.40 27.10 -2.9
Lion Nathan GM Cairns 835485 901680 1737165 0 0 0 0 2004 4.00 1.50 7.6
Amcor RH Jones 1294500 427500 1722000 16.9 100000 540000 1500000 8100000 3411 13.10 -13.90 -3.3
ANZ J McFarlane 1200000 433333 1666666 -15.5 502044 7324822 1750000 25532500 21297 17.70 15.30 14.7
Telstra ZE Switkowski 1000909 654000 1654909 41.0 140720 923123 300000 1968000 27362 33.70 -21.70 5.5
Santos NR Adler 1422532 200000 1622532 2.4 855000 5386500 3000000 18900000 3742 15.50 2.80 24.3
Coca-Cola Amatil DL Kennedy 1620045 0 1620045 -14.0 201000 870330 950000 4113500 4282 2.90 -46.60 -15.8
Perpetual Trust Aust GJ Bradley 1606932 0 1606932 114.8 133394 4739489 446514 15864642 1260 22.60 8.20 26.7
Boral RT Pearse 1065185 540000 1605185 159.3 41868 82480 1121500 2239075 1102 13.60 12.60 14.8
Woolworths RC Corbett 1367117 223463 1590580 36.2 70165 533254 2271000 17259600 8307 23.40 22.70 18.8
Suncorp-Metway WS Jones 902192 606000 1508192 26.2 50393 526607 2000000 20900000 1352 22.30 -4.70 41.3
James Hardie PD McDonald 1064040 443054 1507094 25000 92500 1200000 4440000 1538 24.30 9.70 60.2
NRMA ER Dodd 916000 567000 1483000 1158 3161 0 0 4064 11.00
John Fairfax FG Hilmer 1122662 300000 1422662 40204 168455 3500000 14665000 3288 18.00 4.50 34.1
WMC HM Morgan 1131086 255350 1386436 1.0 322141 2367736 1150000 8452500 8185 5.80 15.20 62.8
Southcorp GJ Kraehe 1080822 289637 1370459 .3 735426 3831569 1000000 5210000 3095 13.80 -21.70 13.8
Foodland Association BJ Alty 956874 377936 1334810 23.2 335513 2835085 0 0 783 16.50 -18.30 -23.5
Futuris Corporation AL Newman 1204365 107500 1311865 7.6 9980000 17964000 3000000 5400000 1073 10.70 -8.50 5.7
Oil Search PR Botten 1298290 0 1298290 45.0 0 0 1900000 2964000 712 5.70 -18.30 156.9
Simsmetal J Crabb 942515 352151 1294666 0 0 0 0 498 9.40 -18.80 500.0
British American
Tobacco
GL Krelle 799735 490702 1290437 3000 39000 39228 509964 1956 24.90 -27.00 -27.4
QBE Insurance FM O'Halloran 928300 320000 1248300 42.4 823043 7407387 390000 3510000 3838 13.00 42.10 20.1
FH Faulding ED Tweddell 835157 395673 1230830 -20.4 734200 7709100 240000 2520000 1741 12.20 -11.00 16.0
Hutchison Telecomm B Roberts-
Thomson
729000 500000 1229000 78371122 245301612 325000 1017250 1852 -87.2
ERG PJ Fogarty 790000 425000 1215000 65.9 4375107 14875364 1250000 4250000 687 15.30 363.20 74.0
PMP Communications RS Muscat 959371 166500 1125871 0 0 1000000 1900000 470 -.60 -43.60 -3.7
Axa JA Killen 784926 319250 1104176 220657 653145 904000 2675840 4952 6.70 15.60 41.7
Toll Holdings PA Little 848000 221000 1069000 23.6 8863637 112568190 200000 2540000 713 28.40 74.40 29.0
Ecorp D Petre 551290 500000 1051290 2000 4160 17631579 36673684 346 -14.40 -14.30
AXS RG Humphry 701813 325000 1026813 20.7 55333 665656 0 0 1194 32.60 15.70 60.7
MIM Holdings NW Stump 940820 50000 990820 7.2 773444 850788 0 0 1894 7.40 -15.90 426.7
PowerTel GE Dupler 797098 178571 975669 0 0 1000000 1180000 545 -62.50 4.50 -51.0
Ten Network JH McAlpine 768568 206505 975073 18.3 0 0 2300000 6072000 997 7.00 18.60 8.5
Smorgan Steel RK Horsburgh 800000 158133 958133 8.6 110758 118511 1025373 1097149 725 9.70 -41.50 8.3
Pacific Dunlop RL Chadwick 957547 0 957547 -2.0 621400 981812 1200000 1896000 1574 -5.60 -31.70 -29.9

64
United Energy K Stamm 767602 184777 952379 44.2 30000 98700 0 0 1353 16.00 35.80 10.0
Jupiters RK Barnes 622000 329000 951000 26.8 127605 438951 0 0 820 1104.00 -8.90 50.8
Howard Smith KJ Moss 941000 0 941000 -30.3 46000 375820 70000 571900 1600 14.60 -29.40 -2.0
Email RG Waters 737500 185000 922500 26.0 106100 284348 1000000 2680000 713 8.50 5.20 18.3
David Jones P Wilkinson 918985 0 918985 -12.5 5000 6950 4500000 6255000 528 8.80 -3.00 12.5
Pasminco DM Stewart 917683 0 917683 10.0 51029 42864 1250000 1050000 922 1.60 -46.60 340.0
Origin Energy GA King 650335 236000 886335 40029 82059 918375 1882669 1157 4.50 -37.10 24.0
Austrim Nylex AR Jackson 856355 0 856355 10339900 16026845 361000 559550 375 15.40 -33.80 -7.9
Bankwest TC Budge 712320 130000 842320 34.0 9101 32582 600000 2148000 1801 17.40 11.20 12.9
Orica PL Weickhardt 749100 92800 841900 35.7 15499 92064 457500 2717550 1626 13.00 -8.20 -24.5
CSL B McNamee 635000 200000 835000 22.8 120000 4184400 300000 10461000 5246 9.00 153.30 13.0
Adelaide Bank BF Fitzpatrick 658356 165000 823356 545500 2825690 0 0 435 11.20 -16.10 -17.1
St George Bank EA O'Neal 821000 0 821000 87.0 11700 148005 1500000 18975000 5524 3.00 8.70 3.6
Nufam DJ Rathbone 698034 117229 815263 37318498 117553269 0 0 475 -33.70 15.1
Uhir Gold M. Merton 804795 0 804795 19.3 1000 570 0 0 628 -1.30 -42.10 27.3
Crane Group JW Ingram 686417 110000 796417 448029 3673838 200000 1640000 351 10.80 -7.60 20.3
Howard Smith I Tsicalas 785000 0 785000 249000 2034330 233000 1903610 1800 14.60 -29.40 -2.0
WA Newspapers DW Thompson 654561 125000 779561 11.6 568453 3029845 0 0 1085 52.40 -6.10 45.3
Sons of Gwalia PK Lalor 770327 0 770327 868689 5264255 500000 3030000 690 23.30 32.00 5.2
National Foods MG Ould 760527 0 760527 -15.0 2322648 6898265 1000000 2970000 687 15.00 27.90 8.6
BRL Hardy SB Millar 625310 133800 759110 32.8 199136 1503477 403200 3044160 1121 15.50 12.10 25.4
Data Advantage B Bargon 749473 0 749473 0 0 0 0 541 2.00 19.90
PaperlinX I Wightwick 579328 152176 731504 29417 104725 0 0 875 7.50
Pacifica Group BJ Jackson 687500 37500 725000 -3.2 32036 103797 715000 2316600 493 10.20 -32.30 22.4
Iluka Resources MH Macpherson 559300 158000 717300 92.4 57083 226620 100000 397000 896 12.30 46.40 1061.3
Bank of Queensland J Dawson 614258 100000 714258 19.0 1000 5810 0 0 334 12.80 -9.80 1.0
Caltex Australia ID Blackburne 677136 32500 709636 6.0 40000 94400 0 0 642 10.40 -12.50 29.3
APN News & Media AC O'Reilly 676884 0 676884 22.9 1500000 6750000 1200000 5400000 1174 11.50 34.60 17.6
Sonic Healthcare GS Goldschmidt 327578 300000 627578 1.5 858000 6735300 3500000 27475000 1439 8.20 62.20 -10.6
Transurban City Link K Edwards 500000 120000 620000 19.5 50000 205000 0 0 2014 -39.20 11.40
Lang Corporation CD Corrigan 600000 0 600000 4201928 42649569 0 0 1221 17.00 79.60
Corporate Express T Nark 584088 0 584088 534750 4598850 356250 3063750 809 19.30 144.90 117.2
QTC Resources CD Rawlings 551941 30000 581941 0 0 800000 960000 826 -5.00 -106.7
TAB Ltd W Wilson 478000 100000 578000 4.7 771 2560 1500000 4980000 1555 13.50 -20.00 26.4
Bendigo Bank R Hunt 433500 100000 533500 210931 1086295 0 0 560 7.40 -20.70 18.8
Seven Network MA Plavsic 532396 0 532396 -63.9 0 0 250000 1835000 1909 9.40 60.00 91.9
Cochlear CB Livingstone 384703 128636 513339 9.2 100000 2720000 216000 5875200 1408 52.50 139.73 22.6
Energy Developments WP Pahor 425000 75000 500000 8021191 112296674 700000 9800000 1214 10.40 109.68 43.1
Technology One A Di Marco 369202 118382 487584 27900000 44640000 0 0 463 69.40
Orogen Minerals CW Lepani 469939 0 469939 0 0 0 0 465 2.00 3.50 68.9
Orbital Engine Corp KC Schlunke 436775 0 436775 16.6 20931 45630 202500 441450 759 -40.30 340.96 -36.0

65
Strickland Trust PJ Daly 345003 85000 430003 15.1 0 0 0 0 2054 9.90 2.20 5.8
Computershare CJ Morris 423500 0 423500 28.3 52435212 465624683 0 0 4665 14.70 92.70 134.4
Ashton Mining DW Bailey 361205 0 361205 -72.5 100000 224000 1000000 2240000 712 -14.90 40.90 -456.0
Data Advantage D Grafton 303474 44500 347974 0 0 1600000 8992000 541 2.10 19.90
Challenger Int WEB Ireland 300000 30000 330000 72.0 0 0 300000 1221000 936 37.50 -5.20 90.5
Envestra OG Clarke 260257 25000 285257 125000 115000 0 0 523 -12.00 -17.10 48.0
Seven Network K Stokes 271307 0 271307 -81.6 91948189 674899707 0 0 1909 4.90 60.00 91.9
Harvey Norman G Harvey 250400 0 250400 .0 303482067 1259450578 3000000 12450000 4255 23.30 41.20 37.3
KAZ Comp Services P Kazarcos 249032 0 249032 106080000 121992000 1800000 2070000 540
Newcrest Mining RB Davis 245096 0 245096 3000 11404 0 0 903 1.00 32.70 -540.0
Open Telecom W Passlow 230945 0 230945 70186962 126336532 0 0 1041
MYOB C Winkler 183961 0 183961 19750000 78012500 625000 2468750 872
Hills Motorway Group WR Clark 156000 0 156000 4.4 0 0 0 0 823 -24.20 -13.60 -3.9
Powerlan T Baker 138557 0 138557 129600600 167184774 1200000 1548000 447 20.10
Mayne Nickless PJ Smedley 2000000 10340000 0 0 1808 -17.60 -33.70 -30.6
* Figure adjusted to reflect average individual ownership.

66
Appendix 3
Australian Financial Review Executive Remuneration Survey Data, 2000-2001
Source: Australian Financial Review, 16 November 2001, S8-S9.
Selection Criteria: Chief Executive Officers, Managing Directors, and Chairpersons of the 150 largest locally-listed companies by market capitalisation,
excluding property and other trusts.
COMPANY EXECUTIVE $ BASE $ BONUSES $ TOTAL $ CHANGE SHARE NO. SHARE $ OPTIONS 0PTION $ CAPITAL ROE % SPC % EPSC
Newscorp P Chernin 14752920 16027000 30779920 0 0 1000000 18020000 55095 -2.23 -21.66 -140.9
Rio Tinto LA Davis 2702040 13058646 15760686 567.88 6100 208254 204941 6996689 16122 21.69 23.61 30.6
Newscorp KR Murdoch 8972880 5880000 14852880 15.99 607853010 10953511240 16275000 293275500 55095 -2023.00 -21.66 -140.9
AGL LF Bleasel 1296234 10416137 11712371 416.79 0 0 0 0 3234 6.25 -14.77 -75.4
Westfield Holdings FP Lowy 1066554 8867080 9933634 17.37 159197708 2228767912 0 0 9200 24.41 21.92 13.9
Coles Myer D Eck 3645511 4900000 8545511 89.90 0 0 4400000 27808000 6859 4.10 -1.47 -52.8
Southcorp TP Park 4850509 2993212 7843721 0 0 2050000 15600500 4680 12.15 57.84 -1.8
BHP Billiton PM Anderson 1583333 6239739 7823072 10.29 950856 9879394 1500000 15585000 33132 18.79 12.67 22.2
Rio Tinto RL Clifford 5494000 910800 6404800 174.41 183987 6281316 199754 6819602 16122 21.69 23.61 30.6
PBL HG Falloon 2272369 3000000 5272369 102.68 0 0 0 0 6454 -2.46 -29.34 -125.9
Santos NR Adler 1225308 3770525 4995560 207.89 0 0 0 0 3821 14.49 27.50 36.3
Macquarie Bank AE Moss 604952 4089025 4693950 -7.11 324857 11954738 366371 13482453 7575 27.07 41.10 11.7
AMP P Batchelor 1734000 2458000 4192000 72.44 43213 950254 1542980 33930130 20041 12.36 29.37 360.2
NRMA Insurance ER Dodd 3241000 874000 4115000 177.48 0 0 275000 935000 4450 10.99
Leighton Holdings WM King 1741117 1900000 3641117 7.68 6660 55611 600000 5010000 2902 22.30 55.20 16.4
MIM Holdings NW Stump 704160 2863396 3567556 260.06 0 0 0 0 1807 4.54 33.33 -38.2
Pacific Dunlop RL Chadwick 3394137 100000 3494137 264.91 0 0 0 0 781 -11.02 -43.62 -71.4
Cable & Wireless Optus CJ Anderson 1775093 1714421 3489514 44.80 61240 230875 0 0 20035 24.12 -28.06 60.0
Coca Cola Amatil DL Kennedy 1927716 1230000 3157716 94.92 201000 884400 950000 4180000 3443 4.64 54.39 5.9
Wesfarmers MA Chaney 1144000 1900000 3044000 23.04 402889 10922321 0 0 11541 17.81 103.83 19.1
PBL PW Yates 664832 2374647 3039479 55929 507835 0 0 6454 -2.46 -29.34 -125.9
Burns Philp TJ Degan 2360732 656414 3017146 1800000 828000 1310172 602679 343 48.67 9.52 -3.5
CSR P Kirby 1426600 156590 2992500 32.63 669695 4754835 700000 4970000 5787 16.59 53.02 38.5
Jupiters RK Barnes 2440000 420000 2860000 200.74 0 0 0 0 972 13.40 34.16 14.3
Caltex Australia ID Blackmore 171426 2620508 2791934 293.43 0 0 0 0 326 3.59 -43.21 -64.7
Normandy Mining RJ de Crespigny 1171000 1611000 2782000 4.31 71076161 88134440 0 0 2551 -14.19 37.78 -91.4
Westpac D Morgan 1408084 110000 2508084 45.70 734742 10624369 3675000 53140500 27176 19.31 19.98 7.5
Telstra ZE Switkowski 1150832 1196000 2346832 41.81 105800 569204 910000 4895800 31204 32.68 -20.65 10.1
Macquarie Bank DS Clarke 302462 2038068 2340530 -53.68 4448385 163700568 343750 12560000 7575 27.07 41.10 11.7

67
Spotless Group BS Blythe 1044248 1202693 2246941 13.16 13144855 97929170 0 0 591 9.69 33.13 8.3
Village Roadshow JR Kirby 1883330 363547 2246877 -2.44 111819817 180029905 6906 11119 544 6.35 -30.00 -79.2
Foster's Group ET Kunkel 1636083 600000 2236083 -1.79 0 0 0 0 9704 15.46 16.60 1.2
Brambles Indistries JE Fletcher 1719000 507000 2226000 23.26 0 0 0 0 11001 7.24 -6.50 -58.6
Amcor RH Jones 1396228 820000 2216228 28.70 100000 662000 3000000 19860000 4197 14.92 13.34 -3.2
Tabcorp Holdings IR Wilson 1865256 343077 2208333 -18.02 3926000 37297000 3000000 28500000 3717 15.13 -1.04 .6
Boral RT Pearse 1348119 829200 2177319 -47.02 86869 250183 1721500 4956920 1800 8.45 37.00 -9.1
Westfield Holdings SM Lowy 850000 1250000 2100000 159197708 2228767912 1250000 17500000 9200 24.41 21.92 13.9
CBA D Murray 1560173 450000 2010173 -1.71 47108 1608738 1500000 51225000 38683 13.58 23.33 -34.7
Mayne Nickless PJ Smedley 1956344 0 1965344 2000000 12900000 0 0 5977 14.24 88.05 180.0
NAB FJ Cicutto 1371408 550000 1921408 22.00 39647 1425310 1300000 46735000 48651 17.61 25.64 7.7
Lend Lease DH Higgins 1882928 0 1882928 -60.89 1117841 14028905 0 0 4752 3.40 -41.31 -95.2
James Hardie Industries PD McDonald 1136782 686210 1822992 20.96 81000 429300 1200000 6360000 2006 -31.88 20.80 -75.8
Woolworths RC Corbett 1104780 703946 1808726 13.71 118165 1299815 2271000 24981000 275 47.97 78.43 24.1
Woodside Petroleum JH Akehurst 1522529 284000 1806529 5.71 464679 7630029 0 0 8913 50.84 26.31 191.8
Suncorp Metway WS Jones 937500 855365 1792856 18.88 93643 1404645 2000000 30000000 6784 74.02 20.1
Village Roadshow GW Burke 1724758 0 1724758 -25.11 2400 3864 7390400 11898544 544 6.35 -30.00 -79.2
Lion Nathan GM Cairns 1143963 525600 1669563 -3.89 327153 1442745 314594 1387360 1753 7.00 15.45 96.2
St George Bank EA O'Neal 941000 715000 1656000 101.71 19200 285888 1500000 22335000 8408 9.69 30.60 8.9
One Steel RL Every 1302549 290137 1592868 102793 94750 4309787 3965004 463 -108.8
WMC HM Morgan 1168544 407546 1576090 13.68 402141 3852511 1150000 11017000 10384 16.26 28.19 181.7
Goodman Fielder DLG Hearn 1551936 0 1551936 -15.84 505000 590850 6000000 7020000 1798 -6.50 -5.32 -193.8
ANZ J McFarlane 1500000 0 1500000 -8.16 530117 8529583 2600922 41848835 26909 19.73 31.96 9.4
Alintas Gas PJ Harvey 207900 1275210 1483110 0 0 0 0 609 245.87
Qantas J Strong 1477204 0 1477204 -29.64 0 0 0 0 5593 13.47 3.55 -23.7
Futuris Corp AL Newman 1270537 170625 1441162 9.86 950000 25080000 0 0 1014 11.31 47.49 .8
Austereo Group BC March 467104 881112 1348216 1025 2163 0 0 689 10.72
Simsmetal J Crabb 969837 358555 1328392 2.60 500000 2870000 800000 4592000 473 13.95 5.71 51.8
ERG PJ Fogarty 920000 400000 1320000 8.64 11819019 16310246 3750000 5175000 389 15.32 -66.69 -82.1
Aristocrat Leisure DH Randall 1164033 150000 1314033 -43.52 0 0 800000 5640000 2924 43.82 24.78 9.5
Mayne Nickless RR Dalziel 1306947 0 1306947 -46.09 0 0 0 0 5977 14.24 88.05 180.0
David Jones P Wilkinson 934272 370175 1304447 41.79 5000 5600 6000000 6720000 449 8.79 -9.82 -21.9
PaperlinX IM Wightwick 942759 346950 1289709 76.31 148136 601432 0 0 1360 9.94 28.08 -58.8
AXA Asia Pacific
Holdings
A Owen 1286546 0 1286546 16.52 65246 204220 56796 177771 3527 10.36 20.58 24.0
AGL GW Martin 868877 400000 1268877 526254 4462634 0 0 3234 6.25 -14.77 -75.4
CSL BA McNamee 872809 393034 1265843 51.60 40000 1908000 382540 18247158 7723 9.37 44.39 27.5
Origin Energy GA King 764845 500000 1264845 42.71 40029 120087 936750 2810250 2081 7.84 86.34 -10.0
National Foods MG Ould 851753 375000 1226753 61.30 3248015 7308034 0 0 769 13.43 -34.25 -8.0

68
Foodland Association TM Coates 1206224 0 1206224 -9.63 454221 5005515 0 0 1145 12.71 39.89
John Fairfax Holdings FG Hilmer 1106196 100000 1206196 -15.22 64868 262715 3500000 14175000 2535 11.49 -13.87 -31.3
Smorgan Steel RK Horsburgh 1155784 50000 1205784 25.85 75758 68182 3057873 2752086 370 -28.57 -32.84 -411.4
Telecom New Zealand T Gattung 1182255 0 1182255 912760 4162186 0 0 3367 19.90 -22.71 -31.8
Ten Network JH McAlpine 763333 400000 1163333 19.31 0 0 0 0 742 2.25 -27.45 -74.4
TAB Limited W Wilson 600000 560000 1160000 100.69 5034 15706 1500000 4680000 1465 14.89 27.87 9.7
Downer EDI SJ Gillies 931500 187500 1119000 1529483 841216 0 0 161 9.63 -25.68 -6.6
ASX RG Humphrey 766728 350000 1116728 8.76 110666 1576991 0 0 1221 33.19 24.47 -5.5
Qantas G Dixon 1116051 0 1116051 13718 48013 0 0 5593 13.47 3.55 -23.7
Adelaide Bank BF Fitzpatrick 746800 348750 1095550 33.06 611178 3514274 0 0 572 11.27 20.29 15.3
PMP Communications RS Muscat 1083362 0 1083362 -3.78 20000 9000 0 0 154 -150.09 -74.11 63.8
Vision Systems JC Fox 736551 330000 1066551 4038350 14416910 0 0 331 63.19 166.72 696.3
Southcorp GJ Kraehe 902981 150000 1052981 -23.17 0 0 0 0 4680 12.15 57.84 -1.8
Orica PL Weickhardt 836500 137400 973900 15.68 36589 162821 595000 2647750 1580 7.61 -41.22 -7.4
Bank of WA TC Budge 768513 180000 948513 12.61 209101 922135 600000 2646000 1140 15.13 16.77 12.5
Toll Holdings PA Little 680001 225000 935001 -12.53 8984147 175280708 748678 14606708 1968 27.70 97.98 17.3
Crane Group JW Ingham 769823 160000 929823 16.75 448029 3203407 200000 1430000 395 2.83 -10.06 -74.2
APN News & Media AC O'Reilly 486106 441656 927762 37.06 0 0 0 0 705 13.90 .07 17.6
Perpetual Trustees GJ Bradley 650000 253500 903500 -43.77 127474 5214961 401384 16420619 1102 25.36 57.54 33.5
Southcorp KM Lambert 410295 480000 890295 1200000 9132000 0 0 4680 12.15 57.84 -1.8
Pacifica Group BJ Jackson 737500 151875 889375 17.25 32436 115148 895000 3177250 475 -1.56 -15.50 -114.2
Sons of Gwalia PK Lalor 768700 75000 843700 9.52 868689 7879009 212500 1927375 850 22.31 72.76 3.7
MIM Holdings VP Gauci 761660 73000 834660 79255 95106 788462 946154 1807 4054.00 33.33 -38.2
WA Newspapers DW Thompson 708322 125000 833322 6.90 568453 2836580 0 0 1062 55.62 -5.77 -26.2
Orogen Minerals CW Lepani 833000 0 833000 0 0 0 0 290 -40.45 452.3
BRL Hardy SB Miller 710439 105486 815925 7.48 233017 2407066 394200 4072086 1891 15.65 45.46 18.6
Oil Search PR Botten 803360 0 803360 0 0 1000000 1200000 709 7.64 -34.43 32.4
GWA International GJ McGrath 794219 0 794219 754275 1772546 0 0 338 10.72 6.48 -.7
Austereo Group PM Harvie 313312 475000 788312 1030 2173 0 0 689 10.72
Iluka Resources MH Macpherson 629992 148613 778605 8.55 57083 281419 100000 493000 756 13.70 3.14 72.7
Seven Network MA Plavsic 774411 0 774411 45.46 300000 2139000 150000 1069500 1818 1.72 .59 -50.2
Cochlear CB Livingstone 151477 610160 761637 48.37 0 0 0 0 2667 63.42 35.61 52.0
Sonic Healthcare GS Goldschmidt 333299 418000 751299 19.71 800000 6328000 3125000 24718750 2047 11.51 15.00 6.7
Novus Petroleum RC Williams 517217 220983 738200 1183625 2201543 2000000 3720000 271 14.15 5.39 103.3
QBE Insurance FM O'Haloran 516000 190000 706000 -43.44 843043 9956338 390000 4605900 4041 80.60 44.52 9.9
Foodland Association BJ Alty 704962 0 704962 -47.19 0 0 0 0 1145 12.71 39.89
APN News & Media VC Crowley 602216 100000 702216 3.74 0 0 400000 1616000 705 13.90 .07 17.6
Pacific Hydro J Harding 641425 50000 691425 632214 2617366 1190000 4926600 546 19.61 135.23 141.6
Transurban Group K Edwards 550000 125000 675000 8.87 61000 274500 0 0 2361 -64.82 19.74 -3.7

69
Henry Walker Eltin RV Ryan 652773 0 652773 921671 884804 900000 864000 169 6.71 -25.58 -33.8
Ramsay Health Care IPS Grier 545254 100000 645254 124600 380030 330000 1006500 611 8.83 267.47 127.9
Goldfields PW Cassidy 491077 130000 621077 5336 9445 1100000 1947000 446 29.15 58.4
Jupiters RA Hines 468000 151000 619000 10000 42500 0 0 792 13.40 34.16 14.3
Southern Cross Broad AE Bell 610726 0 610726 83979 1024544 0 0 623 37.08 -6.5
Billabong International MD Perrin 419549 190000 609549 13138012 69631464 0 0 1639 75.12
Newcrest Mining RC Barwick 607777 0 607777 5000 22450 250000 1122500 959 9.00 -.24 1014.3
Lang Corp CD Corrigan 600000 0 600000 .00 4201928 46221208 1000000 11000000 2053 20.57 21.91 41.4
Sons of Gwalia M Cutifani 581967 15000 596967 0 0 50000 453500 850 22.31 72.76 3.7
Adsteam Marine DJ Ryan 437917 150000 587917 636314 1215360 0 0 437 8.97 -13.48 -23.7
Cochlear JJ O'Mahony 478786 105000 583786 0 0 150000 5850000 2667 63.42 35.61 52.0
United Energy DG Bacon 581381 0 581381 -38.95 0 0 10000 24200 1052 19.02 -25.77 9.3
TAB Qld R McIwain 578682 0 578682 0 0 1000000 2490000 398 21.88 -13.9
Burswood JW Schaap 578453 0 578453 0 0 1800000 1440000 289 4.43 23.08 -31.3
Adelaide Brighton PJ Wright 554491 0 554491 101000 67670 40000 26800 388 8.33 57.65 131.5
Corporate Express TC Nark 432000 120000 552000 144583 660744 94480 431774 961 30.34 52.33 90.6
Miller's Retail AI Miller 535637 0 535637 13369842 45992195 320000 1100800 696 39.24 104.34 59.4
Bendigo Bank RG Hunt 433500 100000 533500 10.00 207973 1372622 0 0 578 8.02 34.23 14.5
Technology One A Di Marco 281778 251088 532866 9.29 78200000 64906000 0 0 272 31.29 -32.70 10.7
Delta Gold TB Burgess 496568 36000 532568 153950 246320 890700 1425120 580 38.39 28.93 137.8
Energy Developments WP Pahor 450000 75000 525000 5.00 5417765 47784687 1500000 13230000 893 6.79 -9.54 .0
Vision Systems PA Murphy 418750 91600 510350 2097440 7487861 0 0 331 63.19 166.72 696.3
OPSM Protector JF Kelly 479418 0 479418 0 0 0 0 514 1.25 11.95 -1.6
Singleton Group R Tate 475000 0 475000 1465000 5860000 3145500 12582000 522 27.67 103.00 44.0
Altium K Oboudiyat 354232 118519 472751 1187500 5937500 1200000 6000000 318 11.80 2.00 39.7
Inst of Drug Tech GL Blackman 427375 40000 467375 5830313 29151565 250000 1250000 187 33.49 17.67 14.5
Challenger International WEB Ireland 400000 62885 462885 40.27 34293745 119342233 1380000 4802400 672 37.45 6.75 48.0
Bank of Queensland JK Dawson 383963 75000 458963 0 0 200000 1324000 281 12.77 26.58 -.9
Medical Imaging Aust P Macintosh 400000 50000 450000 4730211 5487045 500000 580000 879 8.67 -75.9
HPAL TC Daly 320000 127600 447600 0 0 1113543 2360711 227 418.45
Computershare CJ Morris 423500 0 423500 .00 53322542 327933633 0 0 2979 9.12 -28.41 -4.0
PowerTel SB Butler 314444 100018 414462 30000 9300 1133000 351230 194 -42.41 -82.92 -15.9
Tempo Services JH Schaeffer 414256 0 414256 38682304 87422007 0 0 255 61.57 32.94 32.8
Silex Systems MP Goldsworthy 382134 25000 407134 3424533 199033858 3900000 226668000 315 35.69 58.12 -100.0
Caltex Australia TC Blevins 403448 0 403448 5000 8150 0 0 326 3.59 -43.21 -64.7
Kaz Computer Services P Kazarcos 301365 100000 401365 106080000 145329600 1260000 1726200 507 16.34 52.22 116.9
Data Advantage DJ Grafton 351536 43750 395286 13.60 0 0 1000000 6860000 656 5.80 49.71 200.0
Pan Pharmaceuticals J Salim 364000 31000 395000 88126692 203572659 3500000 8085000 202 12.36 -38.8
United Energy KG Stamm 27811 366247 394058 0 0 5000 12100 1052 18.02 -25.77 9.3

70
Tap Oil PW Underwood 385000 0 385000 2101376 2878885 500000 685000 180 11.42 77.92 24.5
Tempo Services J Eriani 379199 0 379199 1400000 3164000 300000 678000 255 61.57 32.94 32.8
Orogen Minerals JF Kaupa 376320 0 376320 18000 18180 0 0 290 -40.45 452.3
Jubilee Mines KK Harmanis 363421 0 363421 22051166 35061345 500000 795000 170 68.49 28.23
Orbital Engine Corp KC Schlunkey 325893 16000 341893 -21.72 20931 15280 163500 119355 195 -107.74 -60.11 -145.2
Renewable Energy PD Williams 332888 0 332888 20000000 45200000 4000000 9040000 167 -5.24 247.69 -95.7
Santos JC Ellice-Flint 253892 78082 331974 -79.54 1000000 6490000 3000000 19470000 3821 14.49 27.50 36.3
Simeon Wines NR MacKenzie 299250 8977 308227 2000 5180 250000 647500 194 8.46 -.80 3.4
OPSM Protector J. Pinshaw 306610 0 306610 150000 405000 2000000 54000000 514 1.25 11.95 -1.6
Envestra OG Clark 282917 20000 302917 6.19 128750 104288 0 0 268 -26.59 17.39 -125.0
Ridley Corporation MP Bickford-
Smith
279584 0 279584 0 0 500000 345000 250 424.00 21.05 66.7
Pacific Dunlop AB Dennis 276233 0 276233 9732 8175 0 0 781 -11.02 -43.62 -71.4
Bank of Quensland DP Liddy 266231 0 266231 1000 6620 0 0 281 12.77 26.58 -.9
Harvey Norman G Harvey 250400 0 250400 .00 297782067 1295351991 3000000 13050000 2596 19.00 15.57 -4.7
Collecton House JM Pearce 228447 0 228447 17447730 92298492 0 0 318 25.18
Alinta Gas RB Browning 228330 0 228330 0 0 0 0 609 245.87
Infomedia RD Graham 225966 0 225966 926560 1667808 450000 810000 258 89.65
Seven Network KM Stokes 216676 0 216676 -20.14 91948189 655590588 0 0 1818 1.72 .59 -50.2
Flight Centre GF Turner 86400 80057 166457 17000465 476013020 0 0 1844 48.36 47.76 7.2
Newcrest Mining RB Davis 133966 0 133966 -45.34 3038 13641 0 0 959 9.00 -.24 1014.3
Intellect Holdings JAC de Smet 118246 0 118246 0 0 500000 580000 161 54.67 -27.1
Aquarius Platinum KS Liddell 117253 0 117253 165000 1428900 650000 5629000 288 31.53 116.50 242.3
Portman IF Burston 97515 0 97515 0 0 500000 745000 241 2.12 86.25 -73.7
Peptech S Kwik 95557 0 95557 300000 777000 2200000 5698000 647 -3.12 979.17 -61.7
AFIC RE Barker 89000 0 89000 253379 836151 0 0 555 31.37 -.7
Hills Motorway Group SJ Howard 80000 0 80000 -48.72 0 0 0 0 732 -2.63 36.79 -91.4
Renewable Energy SE Blanch 75000 0 75000 7000 15820 0 0 167 -5.24 247.69 -95.7
Lihir Gold A Roberts 59388 0 59388 0 0 0 0 1256 -24.48 37.88 -66.7
Gribbles Group WS Cameron 41250 0 41250 0 0 0 0 217 5.21
Djerriwarrh Investments RE Barker 34695 0 34695 207974 738308 23633 83897 246 6.41 2.81 -4.8
Lihir Gold M Merton 31720 0 31720 0 0 0 0 1256 -24.48 37.88 -66.7
Altium NM Martin 7692 0 7692 23444000 117220000 0 0 318 11.80 2.00 39.7

71
Appendix 4
Australian Financial Review Executive Remuneration Survey Data, 2001-2002
Source: Australian Financial Review, 6 November 2002, S8-S10.
Selection Criteria: Chief Executive Officers, Managing Directors, and Chairpersons of the 150 largest locally-listed companies by market capitalisation,
excluding property and other trusts.
COMPANY EXECUTIVE $ BASE $ BONUSES $ TOTAL $ CHANGE SHARE NO. SHARE $ OPTIONS 0PTION $ CAPITAL ROE % SPC % EPSC
News Corporation P Chernin 14680380 16977840 31685000 2.9 0 0 22275000 215622000 50899 -31.55 -47.13
News Corporation KR Murdoch 10984620 5310000 16294000 9.7 641043528 6205301351 24005000 232368400 50899 -31.55 -47.13
BHP Billiton PAnderson 10532421 3510021 14042442 79.5 1934014 18621267 0 0 35990 13.36 -1.72 -8.7
Westfield Holdings FP Lowy 978336 10944000 11922336 20.0 158636023 2373194904 0 0 6987 21.24 8.48 31.2
Leighton Holdings WM King 2190564 6847309 9037873 148.2 6660 69197 650000 6753500 2545 22.13 27.80 6.3
Wesfarmers MA Chaney 1222000 6716000 7938000 160.8 402889 10958581 0 0 9898 16.58 .59 25.5
Commowealth Bank DV Murray 1675550 5320000 6995550 248.0 106374 3502896 1750000 57627500 38094 14.54 .98 10.3
Coles Myer D Eck (res) 5459865 0 5459865 0 0 0 0 7569 11.87 5.41 124.6
Macquarie Bank AE Moss 647973 4185686 4833659 3.0 324857 9502067 352371 10306852 4626 14.91 -18.07 -5.5
Burns Philp TJ Degnan 3169314 716606 3885920 28.8 1800000 1170000 691050 449183 458 40.99 41.30 5.0
Mayne Group PJ Smedley 2096348 1749690 3846038 96.6 0 0 2000000 7260000 2930 6.93 -35.11 -40.0
Rio Tinto RL Clifford 2704600 1082560 3787160 -40.9 0 0 0 0 15937 15.30 -3.98 23.3
Westfield Holdings PS Lowy 1504500 2212500 3717000 158636023 2373194904 1250000 18700000 6987 21.24 8.48 31.2
Qantas J Strong 3655238 0 3655238 0 0 0 0 6623 11.34 32.95 14.0
Aristocrat Leisure DH Randall 1297443 2352145 3649588 177.7 300340 1624839 1600000 8556000 2226 33.79 -23.15 27.3
Rio Tinto R Wilson 2148800 1438880 3587680 112390 3767313 674556 22611117 15937 15.30 -3.98 23.3
CSR P Kirby 1505567 2006139 3511706 17.4 1085216 6934530 675000 4313250 5161 13.80 -8.32 -7.5
Tabcorp Holdings IR Wilson 2368309 984217 3352526 51.8 3726000 46575000 3000000 37500000 4296 20.71 32.84 35.2
AMP P Batchelor 1729000 1613000 3342000 -20.3 104569 1631276 1482980 23134488 14725 6.74 -26.07 -39.8
Brambles Industries CK Chow 2753000 540000 3293000 0 0 1782534 16827121 6623 -80.13
Woolworths RC Corbett 2009605 1282500 3292105 82.0 2118165 27853870 1223000 16082450 13028 51.79 20.20 24.3
Henry Walker Eltin RV Ryan 3019474 0 3019474 362.6 921671 663603 450000 324000 167 -5.68 -23.40
Orica P Weickhardt 2886600 121700 2988300 206.8 0 0 0 0 2819 -13.82 121.32
Spotless Group BS Blythe 1100867 1846775 2947642 31.2 13174956 57706307 0 0 1024 7.11 32.14 5.6
National Australia Bank FJ Cicutto 1577291 1350000 2927291 52.4 240616 8517806 1600000 56640000 52725 9.47 5.42 -38.0
Lend Lease DH Higgins 1675533 1156138 2831671 50.4 82877 873524 0 0 4323 6.14 -15.44 56.4
Boral RT Pearse 1480333 1320442 2800775 28.6 236753 887824 2371500 8893125 2380 10.13 23.70 24.8
Foster's Group ET Kunkel 1508001 1240000 2748001 22.9 500639 2363016 1250000 5900000 9772 14.20 -12.27 10.7
Westfield Holdings SM Lowy 850000 1850000 2700000 28.6 158636023 2373194904 1250000 18700000 6987 21.24 8.48 31.2
OneSteel RL Every 1422179 1200000 2622179 64.6 102793 134659 2462735 3226183 846 4.22 37.89

72
PBL PW Yates 2508837 0 2508837 -17.5 116929 1058207 0 0 5352 7.88 .00
Westpac Banking D Morgan 1408084 1100000 2508084 3.0 559732 9090048 3675000 59682000 24889 20.56 14.53 16.2
Qantas Airways G Dixon 1456905 1000000 2456905 120.1 14504 66718 0 0 6623 11.34 32.95 14.0
Axa Asia Pacific AL Owen 1454932 998112 2453044 90.7 124500 336150 0 0 4281 13.50 -9.40 5.7
Macquarie Bank DS Clarke 323986 2109772 2433758 4.0 660885 19330886 194250 5681813 4626 14.91 -18.07 -5.5
Telstra Corp ZE Switkowski 1245850 1150000 2395850 2.1 135380 630871 2690000 12750600 61245 26.77 -13.06 -9.5
Amcor RH Jones 1512910 876317 2389227 7.8 200001 1648008 3000000 24720000 6754 28.26 25.80 153.9
Santos JC Ellice-Flint 1242023 1121918 2363941 1000000 6460000 0 0 3638 18.99 3.36 -9.0
Coca Cola Amatil DL Kennedy 1747631 493086 2240717 -29.0 0 0 0 0 3655 11.99 29.15 181.6
James Hardie Ind PD McDonald 1210750 1017800 2228550 22.2 81000 496692 1824000 11184768 2830 8.99 22.64 -22.2
Coles Myer J Fletcher 1979531 192000 2171531 28018 185759 2500000 16575000 7569 11.87 5.41 124.6
Southcorp KM Lambert 1384111 777100 2161211 1200000 6372000 2000000 10620000 3659 14.50 -27.26 31.0
Lion Nathan GM Cairns 1429450 720000 2149450 28.7 327153 1586692 0 0 2785 8.48 10.23 39.6
WMC HM Morgan 2069960 0 2069960 31.3 402141 3655462 950000 8635500 8443 8.44 -5.90 -46.4
Village Roadshow JR Kirby 1735551 325000 2060551 -8.3 111819817 0 0 335 2.95 -28.99 -16.8
Simsmetal J Crabbe 1982057 0 1982057 0 0 0 0 648 15.01 18.77 16.0
Woodside Petroleum JH Akehurst 1390444 461022 1851466 2.5 586177 7954422 0 0 8013 38.99 -14.06 -5.9
Foodland Associates TM Coates 1781853 0 1781853 47.7 479348 9059677 0 0 2214 12.71 74.68 67.3
Suncorp Metway WS Jones 999999 760000 1759999 -1.8 388859 4786854 2000000 24620000 6402 11.36 -17.71 -31.0
St George Bank EA O'Neal 902000 800000 1702000 2.8 25272 492551 1500000# 21000000# 8852 11.31 8.93 18.0
Iluka Resources MH Macpherson 1402450 299281 1701731 118.6 100083 491408 0 0 1117 9.35 6.74 -28.0
CSL BA McNamee 1279733 387696 1667429 31.7 40000 1287200 625733 20136088 2811 11.52 -30.91 50.2
WA Newspapers DW Thompson 477843 1161136 1638979 96.7 0 0 0 0 1040 40.57 2.01 -23.3
Telecom New Zealand T Gattung 1595754 0 1595754 35.0 1533092 6530972 0 0 8361 -11.32 -1.84
IAG MJ Hawker 1588000 0 1588000 100736 317318 1000000 3150000 3696 -1.07 -5.69
Goodman Fielder TP Park 844487 700000 1544487 -.5 0 0 5000000 8350000 1793 14.67 43.10
Mayne Group SB James 882949 634123 1517072 16.1 750000 3105000 0 0 2930 6.93 -35.11 -40.0
Ansell H Boon 1370394 131957 1502351 10340 64935 120000 753600 1318 -12.13 53.10
ANZ J McFarlane 1500000 0 1500000 -8.2 631039 12172742 2600922 48225000 28323 20.09 17.55 9.4
Village Roadshow GW Burke 1491702 0 1491702 -13.5 2400 2880 6000000 8760000 335 2.95 -28.99 -16.8
PaperlinX IM Wightwick 1046660 419685 1466345 13.7 148796 721661 0 0 1810 9.94 19.75 -2.4
Austereo Group BC March 1060363 359513 1419876 5.3 1025000 1773250 0 0 647 7.00 -16.02 11.6
Futuris Corporation AL Newman 1381182 0 1381182 -4.2 7000000 9520000 3000000 4080000 689 8.48 -48.68 20.9
Ten Network N Falloon 925041 400000 1325041 0 0 7500000 1500000 720 2.25 17.55 -85.9
Smorgon Steel RK Horsburgh 1175477 125875 1301352 7.9 80452 92520 4275373 4916679 1002 4.52 27.78
Downer EDI SJ Gillies 1053000 243750 1296750 15.9 1606550 1060323 0 0 526 8.73 20.00 -3.5
Perpetual Trustees GJ Bradley 712086 582500 1294586 43.3 188366 8080901 336977 14456313 1309 30.80 7.12 39.0
TAB W Wilson 800000 475000 1275000 9.9 3578 11128 1500000 4665000 1430 17.46 .32 5.4
ASX RG Humphry 843603 392000 1235603 10.6 302303 4050860 0 0 228 33.18 -3.74 15.4
MIM Holdings VP Gauci 938884 285406 1224290 46.7 376403 489324 0 0 2277 3.54 8.33 -18.0
John Fairfax Holding FG Hilmer 1109311 100000 1209311 .3 92890 307466 3500000 11585000 2146 4.78 -17.25 -64.7

73
Toll Holdings PA Little 800000 400000 1200000 28.3 8484147 67236856 400000 3170000 7455 24.79 60.12 35.1
Origin Energy GA King 830002 368000 1198002 -5.3 50029 168598 1636750 5515848 2431 8.92 14.24 18.0
Ten Newtwor JH McAlpine 1000000 187200 1187200 2.1 0 0 0 0 720 2.25 17.55 -85.9
National Foods MG Ould 975334 202500 1177834 -4.0 2252533 7726188 0 0 1050 13.41 65.70 11.0
GWA International GJ McGratrh 880283 280000 1160283 46.1 754275 1772546 0 0 689 12.06 7.80 12.0
Adelaide Bank BF Fitzpatrick 676989 482942 1159931 5.9 630583 460326 0 0 649 14.32 24.62 19.9
Crane Group JW Ingram 668131 472763 1140894 22.7 448029 3844089 200000 1716000 401 9.83 19.43 220.9
QBE Insurance FM O'Halloran 1139000 0 1139000 61.3 794800 5277472 450000 2988000 4737 -2.59 -41.75
Colarado RK Webb 467298 665750 1133048 560000 1719200 1600000 4912000 253 26.02 65.95 15.0
PMP Communications RS Muscat 1119327 0 1119327 3.3 20000 16400 500000 410000 261 25.96 78.26
Newcrest Mining RC Barwick 189851 922500 1112351 83.0 0 0 0 0 1856 -10.91 68.82 -60.0
Transurban Group K Edwards 800000 300000 1100000 63.0 61000 256200 1500000 6300000 2021 -.71
Vision Systems JC Fox 1082254 0 1082254 1.5 4238350 5509855 2135000 2775500 148 -7.48 -63.38
AGL GW Martin 939407 128333 1067740 -15.9 527526 5196131 0 0 4475 6.25 16.57 57.7
Metcash A Reitzer 832807 212500 1045307 1200000 2652000 2500000 5525000 1328 17.47 67.42 229.2
United Energy DG Bacon 742247 295585 1037832 78.5 10000 21500 0 0 1145 5.32 -9.66 -63.8
BRL Hardy SB Millar 873210 134558 1007768 23.5 115024 1036366 120000 1081200 1372 12.86 -13.28 7.7
Adelaide Brighton PJ Wright 644834 346500 991334 78.8 300000 2187000 0 0 574 9.85 10.61 -.1
Jupiters RA Hines 711000 280000 991000 29962 161795 500000 2700000 956 15.19 34.26 5.3
Sons of Gwalia PK Lalor 907513 80000 987513 17.0 868689 5255568 0 0 438 12.16 -13.72 -28.0
Cochlear JJ O'Mahoney 642434 316925 959359 64.3 0 0 225000 7661250 1790 63.42 -12.58 27.2
David Jones P Wilkinson 954051 0 954051 -26.9 5367 6977 3000000 3900000 440 1.53 -6.19 20.5
ERG PJ Fogarty 950000 0 950000 -28.0 0 0 3750000 1125000 155 -126.76 -77.78
United Group R Leupen 822189 125000 947189 0 0 0 0 234 13.84 40.85 104.2
Sonic Healthcare GS Goldschmidt 390389 520000 910389 21.2 950000 4892500 3000000 15450000 1638 4.71 -35.87 5.9
Southern Cross Broad AE Bell 719122 178000 897122 46.9 89886 806277 0 0 503 9.43 -27.31 1.5
Brambles Industries JE Flectcher 151000 735000 886000 0 0 0 0 6623 -80.13 57.1
Centro AT Scott 662412 215255 877667 0 0 650000 2340000 1537 10.04 2.80 5.3
Simsmetal J Sutcliffe 588383 249866 838249 -36.9 0 0 193798 1312012 648 15.01 18.77 16.0
Seven Network MA Plavsic 796795 0 796795 2.9 200000 1112000 2150000 11954000 1202 6.83 -20.68 296.7
Oil Search PR Botten 795731 0 795731 -.9 0 0 1000000 810000 762 1.96 -34.15 -67.0
APN News & Media VC Crowley 786379 0 786379 12.0 373334 1362669 900000 3285000 1302 7.68 -8.75 -7.8
Novus Petroleum RC Williams 663742 113066 776808 5.2 1183625 1905636 2000000 3220000 226 1.21 -14.99 -90.0
OPSM Group J Pinshaw 660980 112500 773480 250437 871521 2000000 6960000 481 21.92 28.41 1690.0
Mirvac Group RJ Hamilton 633453 122000 755453 -11.5 13086517 54701641 0 0 2570 10.03 12.67 3.9
Bristile DN Gilham 551000 200000 751000 4300000 11180000 0 0 395 18.79 26.83 .7
Corporate Express TC Nark 600000 150000 750000 35.9 30000 134400 225004 1008018 930 31.96 -4.07 26.3
TAB Qld r McIlwain 672695 50000 722695 24.9 275000 1045000 725000 2755000 577 34.19 52.61 24.5
Orbital Engine KC Schlunke 701149 0 701149 105.1 100000 30000 0 0 55 -107.74 -58.90
Gunns JE Gay 686833 0 686833 3428806 24344523 1000000 7100000 642 26.46 69.80 58.4
Bankwest TC Budge 679560 0 679560 -28.4 400000 1904000 600000 2856000 2306 14.76 19.00

74
Caltex Australia TC Blevins 675528 0 675528 67.4 5000 7700 0 0 494 -20.54 .65 -615.0
Pacifica JR Mackenzie 599194 61172 660366 17950 68928 730000 2803200 559 -12.87 7.93
Miller's Retail AI Miller 654570 0 654570 22.2 24065683 57998296 1090000 2626900 451 23.49 -61.19 15.0
Burswood JW Schaap 651359 0 651359 12.6 0 0 1800000 1584000 287 4.07 10.00 -7.3
Hutchison Telecoms K Russell 572694 75000 647694 0 0 0 0 152 -15.85 9.60 -38.2
Technology One A Di Marco 305734 329822 635556 19.3 78230000 0 0 124 24.32 -28.24 11.3
Ridley Corporation MP Bickford-
Smith
501356 132000 633356 126.5 56311 77146 1000000 1370000 358 11.06 92.96 158.0
Austereo Group PM Harvie 624620 0 624620 -20.8 1030000 1781900 0 0 647 7.00 -16.02 11.6
Gribbles Group WS Cameron 450000 174200 624200 0 0 1300000 858000 245 .76 2.70
Capral GL L'Estrange 450000 170000 620000 730000 1898000 0 0 195 .03 20.93 99.7
Australian Pipeline JK McDonald 476177 140400 616577 15000 35250 0 0 644 8.31 3.20 20.6
Ramsay Health Care G IPS Grier 477901 110000 587901 -8.9 4600 19320 250000 1050000 487 14.65 33.12 74.8
Great Southern Plant JC Young 486099 100000 586099 56251587 33750952 0 0 118 -21.10 21.9
Newcrest Mining AJ Palmer 458774 125000 583774 10000 75800 500000 3790000 1856 -10.91 68.82 -60.0
Energy Developments PA Whiteman 507032 75000 582032 7372306 27277532 0 0 290 5.87 -58.57 3.6
Bendigo Bank RG Hunt 502328 75000 577328 8.2 408101 2775087 0 0 985 10.64 4.62 30.5
AWB A Lindberg 500000 60000 560000 20000 80400 0 0 976 12.14 27.60 30.2
Jubilee Mines KK Harmanis 559161 0 559161 53.9 22051166 34620331 500000 785000 177 60.22 6.08 69.0
Baycorp Advantage DJ Grafton 433893 112500 546393 0 0 1036500 3679575 634 -77.20
Lihir Gold A Roberts 531000 0 531000 0 0 0 0 1245 13.45 45.97
Pacific Hydro J Harding 355112 170000 525112 -24.1 772214 2339808 1280000 3878400 414 19.61 -25.92 14.0
AurionGold TB Burgess 356640 166900 523540 457419 1797657 600000 2358000 1270 26.74 115.34 20.6
Challenger EEB Ireland 470000 47000 517000 11.7 30822615 85686870 7533738 20943792 527 36.20 -18.71 -4.5
Coates Hire JA Brown 514573 0 514573 311735 732577 0 0 406 6.98 170.11 872.7
AlintaGas RB Browning 503000 0 503000 120.3 2000 8600 0 0 698 30.30 -24.2
Pacifica BJ Jackson 424769 64027 498796 0 0 0 0 559 -12.87 7.93
Altium K Oboudiyat 360615 136905 497520 5.2 1187500 1282500 1200000 1296000 117 1.67 -78.40 -83.9
HPAL TC Daly 350000 130000 480000 7.2 0 0 1113543 1614637 182 30.42 -31.28 28.0
Institute of Drug Te GL Blackman 459522 20000 479522 2.6 5830313 3731400 250000 160000 94 19.31 51.90 12.6
Sigma E De Alwis 428679 50000 478679 59829 244701 100000 409000 561 8.58 71.85 144.6
Tap Oil PW Underwood 402229 68000 470229 22.1 2055000 3144150 750000 1147500 231 10.72 11.68 9.8
Peptech S Kwik 460171 0 460171 640000 1510400 1860000 4389600 167 109.28 -10.60
Bank of Queensland JK Dawson 458963 0 458963 0 0 0 0 472 12.25 14.86 .9
Novogen c Naughton 451581 0 451581 318511 652948 700000 1435000 203 -27.90 -9.20
Brazin B. Blundy 450000 0 450000 68578884 157731433 0 0 232 29.99 101.75 92.2
Grand Hotel Group G Cameron 450000 0 450000 31066 18018 0 0 117 -7.68 -43.69 61.3
Adsteam Marine DJ Ryan 428993 0 428993 -27.0 647446 1249571 0 0 474 9.85 -3.50 -2.0
Tempo Services JH Schaeffer 426796 0 426796 3.0 32993000 77533550 5000000 11750000 196 39.88 3.52 3.7
MIA Group P Macintosh 425003 0 425003 5025461 4573170 500000 455000 515 7.59 -18.02 14.0
Ion CJ Peters 425000 0 425000 1656944 4672582 700000 1974000 486 25.23 133.06 54.3
Iress P Dunai 319535 101852 421387 0 0 1500000 3900000 203 109.44 23.22 23.6

75
Thakral Holdings JS Hudson 408075 0 408075 58011 142127 0 0 381 9.11 .00 -74.4
Portman IF Burston 400000 0 400000 100000 184000 1350000 2484000 218 14.36 24.32 575.0
Tempo Services J Eriani 392996 0 392996 3.6 2010000 4723500 585000 1374750 196 39.88 3.52 3.7
Computershare CJ Morris 386333 0 386333 -8.8 54635042 120197092 0 0 1224 13.68 -63.64 71.8
Flight Centre GF Turner 86400 298710 385110 131.4 16993221 463065272 0 0 2062 .90 39.0
Renewable Energy SE Blanch 352230 0 352230 0 0 0 0 11 -5.16 -93.90
WA Newspapers IF Law 200299 150000 350299 500000 2535000 0 0 1040 40.57 2.01 -23.3
Wattyl RB Flynn 343427 0 343427 58594 149415 0 0 252 5.24 65.58
KAZ Computer Service P Kazacos 338651 0 338651 -15.6 106127000 30246195 1260000 359100 185 4.92 -78.08 -28.6
Intellect Holdings JAC de Smet 320770 0 320770 250000 105000 500000 210000 70 90.82 -62.30 25.1
Wattyl IE Jackson 317321 0 317321 2017 5143 0 0 252 5.24 65.68
Billabong Internatio MD Perrin 312013 0 312013 -48.8 13140928 117742715 0 0 1342 11.52 65.90 42.6
AFCI RE Barker 293227 0 293227 229.5 304930 984924 0 0 2400 3.61 4.10 -18.7
Coca Cola Amatil TJ Davis 204110 81534 285644 51000 325380 0 0 3655 11.99 29.15 181.6
Renewable Energy PD Williams 283262 0 283262 -14.9 14500000 1885000 0 0 11 -5.16 -93.90
Bank of Queensland DP Liddy 266231 0 266231 .0 1000 7520 0 0 472 12.25 14.86 .9
Collection House JM Pearce 228447 0 228447 .0 14146730 43854863 0 0 293 25.29 -39.57 85.9
Infomedia RD Graham 218156 0 218156 -3.5 926559 2409053 450000 1170000 298 48.84 -54.44 3.8
Orbital Engine PC Cook 194445 0 194445 20000 6000 0 0 55 -107.74 -58.90
McGuigan Simeon BJ McGuigan 191216 0 191216 8333138 39165749 2000000 9400000 449 37.43
Adelaide Brighton MP Chellow 177067 0 177067 15000 109350 0 0 574 6.87 10.61 -14.4
MYOB C Winkler 174077 0 174077 833300 658307 1666700 1316693 178 10.28 30.30 -73.0
Gasnet RH Keller 160985 0 160985 50000 93000 40000 74400 254 7.00
Harvey Norman G Harvey 149904 0 149904 -40.1 309186199 946109769 3000000 9180000 2671 18.23 -28.50 20.5
Gasnet C O'Reilly 137009 0 137009 15000 27900 100000 186000 254 7.00
Orica MW Broomhead 108300 0 108300 0 0 0 0 2819 -13.82 121.32
Seven Network KM Stokes 75600 0 75600 -65.1 92564349 514657780 0 0 1202 6.83 -20.68 296.7
Dejerriwarrh Investm RE Barker 44885 0 44885 29.4 172910 627663 0 0 475 2.80 -8.6
# Corrected Figures.