It’s been a tough month for BHP CEO, Alex Mackenzie. Corporate Australia still clearly remembers when his predecessor, Marius Kloppers, collected a $16 billion bonus at the height of the mining boom.

Fast-forward to 2016 and Mackenzie’s bonus has been canned. Unsurprisingly, really, given the company ran up $8 billion of losses in the last 12 months, and his company was part of last year’s Samarco project that killed 96 people in Brazil.

 

 

Instead, Mr Mackenzie will have to be satisfied with his base salary of around $31,000 per week.

Tales of huge bonuses are commonplace for ASX 100 companies; however, a report from the Australian Council of Superannuation Investors suggests they are no longer an incentive for increasing businesses, but have become a clever way of hiding true wages from shareholders in their annual returns.

Last year, 93% of ASX chief executives received a bonus – the highest level since 2008 when the whole world came crashing down. Back then, bonuses were paid largely because there was so much money washing through the system (remember when the ASX was nudging 8,000 points?).

 

 

These days, things are much different. In fact, executive wages actually shrank by 4% in 2015. No need to worry, though – they’re all doing just fine.

After the GFC, companies were forced into a ‘two-strikes’ policy that gives power over remuneration to the shareholders. The law works by allowing for a vote on any change to executive salaries. If more than 25% of shareholders reject the proposal in consecutive years, the entire board is forced to stand for re-election.

 

 

It seems that the perverse outcome of this change is to have lower executive wages bolstered by bonuses with that are easily achieved. The executive gets the cash, board is protected and the shareholders lose the effective power of their vote.

What could possibly go wrong? 

[ACSI]