The answer is: it depends.
GRG Remuneration Insight 169
by Kylee Davidson
31 October 2024
A deep dive into GRG’s Executive Remuneration Survey (ERS) database published in July this year for the technology sector tells a very interesting story.
Historically, the technology sector in Australia has led the field in terms of leveraging both short-term and long-term variable remuneration plans to attract top executive talent by offering compelling wealth sharing opportunities.
A CEO working in the Australian technology sector in a company with a market value between $75M and $750M, can expect to be paid a premium over other sectors. Whilst this premium is relatively conservative when considering fixed pay (around 9% over peers), the addition of variable pay can see the premium reach as high as 30% at total package (at target).
When we analyse maximum or stretch variable pay (additional variable remuneration over the “target” level when high performance is delivered), a CEO’s total remuneration package can attract as much as a 68% premium in this market range. The most common forms of variable pay amongst this discrete group are a combination of short-term cash combined with long-term equity.
This premium appears to be consistent only for CEO roles in the $75M–$750M business value range; outside of this range it becomes less clear. If we analyse other executive roles in this same range, the relationship between executive pay in the tech sector vs other sectors is also far more variable. Perhaps companies in this range have the resources and need to attract and retain a high-calibre CEO that can take the business from start-up through to a stable state. A variable remuneration premium to incentivise such a strategic transition is likely to be highly attractive, and effective in aligning growth outcomes to rewards, particularly for the key strategic role of CEO.
The importance of understanding these market differences is critical to attracting, retaining and motivating your executive team. As the organisation grows the remuneration strategy will likely need to shift to match changing organisation strategy, and market/peer conditions. Ensuring your approach to executive reward is strategically aligned to the company objectives and circumstances is essential to secure clarity and alignment for all stakeholders as the business evolves.
GRG’s Executive Remuneration Survey (ERS) displays executive pay in the Australian market via a dynamic, self-service platform that allows you to review remuneration quantum and variable plan metrics by sector, role and market capitalisation.