Utilities Benchmark

The market for executive remuneration strengthened in 2023. Demand for capable executives rose significantly in energy-based utilities as a range of projects progressed. Likewise, water companies are embracing renewable technology. This manifests in the growth of executive remuneration. We’ve seen increases of up to 10.0% in some utility companies.

Board fees remained relatively flat during 2023. Many utility boards are well paid compared to other sectors. Some directors are salaried executives of owner companies and do not receive board fees directly. Thus, there is little market pressure for fee increases in privately owned utilities.

STI payments increased in 2023 and returned to pre-pandemic levels. Financial results improved for some of the larger energy companies. Safety performance remained sound as did the results of customer surveys. Some utilities made STI awards up to 90.0% of the maximum.

With the level of project work going on across Australia and New Zealand demand for capable CEOs and executives remains strong. The level of turnover for executives across the sector has been high over the last 2 years with new CEOs appointed at a range of utility companies. Turnover amongst level 2 executives in utilities tends to follow the appointment of a new CEO.

Stakeholder scrutiny of all aspects of board and executive remuneration outcomes continues to be intense. Qantas is a case in point, and this will continue in 2024. Boards and Remuneration Committees have been rigorous in the application of executive remuneration governance principles.

CEO and executive remuneration strategy has been reviewed over the last 3 years for some. STI and LTI targets and maximums have been varied depending upon company priorities. In two instances we are aware LTI plans were discontinued. Very few water companies continue to offer an STI and none an LTI.

Revenue is an important measure of company size and, to a degree, both board and executive remuneration are related to company size. Our benchmark sample is made up of a representative mix of utility companies ranging from relatively small local entities through to national and multinational players.

We have captured information from the larger listed energy companies through to local water utilities, providing us with the capacity to benchmark your organisation very specifically. Of the 72 companies in our benchmark database 39 are energy-based utilities and 33 are water companies.

In this benchmark sample 46 companies are in government ownership and 24 in private ownership or listed on the ASX or NZSX. Two are co-operatives. Remuneration practice is very different across the two primary ownership groups. Government owned utilities are generally less inclined toward variable reward.