However, this perspective overlooks crucial cultural differences and socio-economic implications. By resisting the urge to mimic these global counterparts, ASX-listed companies have the opportunity to pioneer a more equitable approach to executive remuneration that aligns with its cultural ethos and promotes fair wealth distribution.
Cultural divergence in executive pay
Australia’s socio-cultural fabric distinctly differs from that of the US and UK. One of the hallmarks of Australian society is its emphasis on egalitarianism and fairness, values that often clash with the growing disparities seen in executive pay overseas. The wider cultural sentiment is wary of creating stark divides between top executives and the general workforce, highlighting concerns over income inequality and social cohesion.
In contrast, the United States presents a stark picture where the CEO-to-worker pay ratio has skyrocketed over the past several decades. According to the Economic Policy Institute, the CEO-to-worker pay ratio at the 350 largest US firms by revenue increased from 21-to-1 in 1965 to 281-to-1 in 2024.
One of the hallmarks of Australian society is its emphasis on egalitarianism and fairness, values that often clash with the growing disparities seen in executive pay overseas.
Meanwhile, a study by the Institute for Policy Studies shows the average CEO-to-worker pay gap across the 100 companies in the S&P 500 with lowest median worker pay – dubbed the Low-Wage 100 – widened by 12.9% between 2019 and 2024, from 560-to-1 to 632-to-1. This widening gap serves as a barometer of broader wealth distribution disparities, where economic gains have disproportionately favoured the top echelon at the expense of middle- and lower-income groups.
The Australian context
In Australia, while the CEO-to-worker pay ratio has also increased, it remains considerably more balanced than the US scenario. According to data from the Australian Council of Superannuation Investors, the CEO-to-worker pay ratio across the S&P/ASX 100 stood at approximately 55 times the average worker’s salary in 2024. While not insignificant, this difference reflects Australia’s tendency towards moderation and equity in income distribution.
Moreover, Australia’s robust regulatory frameworks, including the “two strikes” rule, support a remuneration system that prioritises shareholder approval and transparency, allowing for greater scrutiny and accountability. This structure is designed not only to prevent reckless pay inflation but also to ensure a more equitable share of corporate prosperity.
The case against adopting a global perspective on pay
Adopting US and UK-style pay structures risks exacerbating the inequities that Australians are keen to avoid – and this cultural expectation should and is expected to be passed through to how ASX-listed companies are governed.
Companies should be encouraged to align executive incentives with sustainable, long-term growth that benefits a wider range of stakeholders, including employees, shareholders, and the community.
Instead of rising disparities, Boards should consider internal relativities between the CEO and the broader workforce and seek to moderate the distribution of wealth between these cohorts as an extension of promoting equity and fairness in our societies. Companies should be encouraged to align executive incentives with sustainable, long-term growth that benefits a wider range of stakeholders, including employees, shareholders, and the community.
Australia’s preference for moderation in executive pay can serve as a guiding principle that balances competitive compensation with societal fairness. By resisting pressure to inflate executive salaries in pursuit of international talent, Australia can set a precedent for an alternative model that prioritises collective prosperity over individual excess.
As global conversations on executive pay continue, Australia stands at a crossroads where it can redefine norms rather than follow them. By embracing a culturally attuned approach to executive remuneration, ASX-listed companies can champion equity and social responsibility. This path not only resonates with the values of fairness and egalitarianism but also ensures that Australia remains a bastion of progressive corporate practice in the global arena. Through thoughtful moderation and conscientious policy, ASX-listed companies can shape a future where executive pay enhances rather than undermines societal well-being.
The critical role of executive pay in Australia
Read the other perspective on the debate: A global perspective: Should ASX-listed companies adopt globally competitive executive remuneration structures?
