If we want global champions, CEO incentives must change
Australia’s boards reward caution with short-term bonuses. To build world-class companies, we need decade-long, founder-style incentives for CEOs.
Fortescue’s proposal to grant its new co-CEOs performance rights tied to decarbonisation and diversification targets is a step in the right direction. At least one major Australian board is experimenting with incentives linked to transformation rather than preservation.
But if we are serious about building world-leading companies, we need to go much further. Short-term pay breeds short-term thinking. If we want world-class companies, we must reward leaders as though they are founders.
Australia's market cap concentration tells the story: our largest names remain banks and miners. If we want global champions built here, we must change how we reward CEOs. Current pay structures are short-term, largely guaranteed, and designed for caution. They reward the status quo.
In 2024, 96% (137 out of 142) of eligible ASX 200 CEOs received a bonus. Only five missed out. Many were rewarded despite weak results. These payouts arrive quickly, typically over three years. That horizon is simply too short. It breeds conservatism, not ambition.
