A global perspective: Should ASX-listed companies adopt globally competitive executive remuneration structures?

In Australia, however, executive pay often emerges as a contentious issue, despite its comparatively conservative structure and quantum compared to global counterparts (see figure 1.). Particularly for companies with a significant portion of their executive teams located outside of Australia (e.g., CSL, Ansell) or where they source talent from the global executive talent pool (e.g., CBA, which noted in its 2025 Annual Report that approximately 40% of appointments to Australian major bank leadership teams in the last five years have come from offshore and that CBA itself is increasingly looking to global talent pools), we are seeing an emerging dialogue that it is imperative that ASX-listed companies offer globally competitive remuneration packages to secure the best talent from around the world. Yet, this call can be met with hesitation by some stakeholders who consider competitiveness primarily from a local lens, arguably at the expense of a broader, global viewpoint.

Australia’s approach to executive pay is unique, characterised by stringent scrutiny and the infamous “two strikes” rule. This regulation poses a significant challenge for companies; if shareholders vote against a remuneration report for two consecutive years, it can result in a board spill, triggering potential leadership instability. Such stringent oversight arguably enforces a conservative stance on executive compensation, significantly influencing how Australian companies structure their pay packages.

In comparison, both the United States and the United Kingdom employ the “say on pay” mechanism, which grants shareholders the right to have a direct vote on executive compensation packages. However, in the US, the say on pay vote is advisory, meaning that while shareholders can express dissatisfaction, the vote is not binding, allowing companies some flexibility in response. Conversely, the UK’s say on pay approach holds greater influence, as remuneration policies must be approved by shareholders, with mandatory votes required every three years. However, as it is an extended cycle, it softens the focus on short-term decision making and enables Boards flexibility to make decisions over the 3-year period between binding votes within the parameters of the shareholder approved policies.

These varying degrees of shareholder power illustrate the differences in regulatory environments. The two strikes rule in Australia adds a layer of potential consequence that is more rigorous than its counterparts, creating a climate of caution within executive pay structures. This atmosphere potentially impedes the ability of Australian firms to engage competitively in the global talent market, where aggressive pay structuring is more prevalent.

The crux of the issue rests on the dichotomy between Australian regulatory and shareholder expectations, and the global market standards for executive pay.In regions such as the United States and Europe, executive compensation is structured with a focus on high incentives, including substantial shares, options, and performance-based rewards. These packages are designed not only to attract executives but also to retain them in fiercely competitive markets.

Australian companies, however, often struggle to match these lucrative pay structures due to local restrictions and cultural predilections towards moderation in compensation. This limitation potentially undermines the ability of these firms to attract global talent accustomed to the more lucrative reward systems.

To reconcile this disparity, there is a question as to whether Australian shareholders and proxy advisors employ a global lens towards executive pay. By understanding and integrating global market standards, they can redefine compensation strategies that align with international expectations without compromising the principles of transparency and accountability that characterise the Australian corporate landscape.

This shift requires an open dialogue about the long-term benefits of competitive pay structures and an acknowledgment of Australia’s position in the global market. It also necessitates an assessment of how executive compensation can drive both corporate performance and shareholder value.