Pay for Performance: An Updated Model for the Australian Market

Executive remuneration remains a central focus for institutional investors in Australia and attracts sustained scrutiny during the AGM season. The number of remuneration strikes across S&P/ASX 300 constituents has remained elevated, with 41 in 2023, 40 in 2024 and 33 in 2025, well above the historical range of around 22 to 26 per year.¹ A recurring driver of dissent is the perceived preferential treatment of executives and pay for performance misalignment, particularly where material incentive outcomes are delivered despite weak shareholder returns.

Against this backdrop, Glass Lewis has enhanced the methodology of its Australian pay for performance model to inform our contextual, case-by-case consideration of a company’s performance, remuneration structure and specific pay decisions, as well as its governance practices, level of explanatory disclosure and responsiveness to shareholders. The enhancement brings greater clarity, consistency, and transparency to evaluations of executive pay relative to company performance, helping investors and boards alike better assess alignment.

Addressing the Disconnect Between Shareholder Returns and Executive Incentive Outcomes

The data highlights how this issue continues to resonate with shareholders. Over the past year, companies ranked in the bottom quartile of S&P/ASX 300 performance were 3.6 times more likely to receive a strike based on one-year total shareholder return (TSR), and 3.8 times more likely on a three-year TSR basis (see Figure 1 below). These results point to a persistent disconnect: investors are increasingly unwilling to accept positive incentive outcomes where shareholder returns have lagged. Underperformance continues to be accompanied by rewarding pay outcomes, perhaps contributing to eroding confidence in remuneration frameworks.

Figure 1. S&P/ASX 300 Companies with Strikes in 2025 vs. TSR Performance

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Measuring Quantitative Performance

The updated model uses TSR as its sole quantitative performance measure. TSR serves as a practical proxy for company performance and shareholder experience, capturing the return actually delivered to investors and remaining a familiar reference point across ASX incentive frameworks. The methodology evaluates how company’s relative TSR performance tracks against incentive outcomes over multiple performance periods. Under this approach, greater emphasis is placed on track record by incorporating lookback tests that assess alignment over a longer horizon, rather than relying primarily on a single-year snapshot.

Focusing on CEO Incentive Outcomes

The model focuses on incentive outcomes rather than total pay levels. In the Australian context, scrutiny of pay quantum typically intensifies at specific decision points, such as at appointment, following material changes to pay opportunity, or in connection with unusual awards. Outside these moments, investors tend to focus more closely on outcomes: how much of the available opportunity was paid and whether that result aligns with the shareholder experience. Pay quantum remains relevant to broader remuneration assessment, but it is not what this score is designed to measure.

Consistent with prior practice, the analysis remains anchored on the CEO (or CEO equivalent). This reflects both prevailing market practice and investor expectations, as CEO outcomes attract the greatest scrutiny and are generally intended to reflect overall company performance.

Key Updates to the Scoring Framework

Under the legacy Australian approach, pay for performance outputs were presented as a single overall grade (Good, Fair or Poor), supported by relative comparisons of CEO remuneration and company performance. The 2026 update replaces this with a multi-test scorecard structure, incorporating a blended peer approach and a dedicated qualitative screen embedded within the scoring framework. The model also introduces an aggregated 0 to 100 numerical score and an overall concern level, ranging from Negligible to Severe. This provides greater transparency on how outcomes are derived and how individual tests contribute to the final assessment.

What the Model is Designed to Do

The new Australian pay for performance analysis is designed to provide a consistent, data-driven framework for assessing how closely CEO incentive outcomes track performance relative to peers and offer a clear starting point for evaluating pay outcomes. It is not intended to be a definitive judgement on remuneration, but a structured lens to help investors and companies identify where outcomes appear well aligned and where closer scrutiny may be warranted.

The scoring framework is designed to surface material disconnects rather than penalize marginal misalignment or normal variation. Elevated concern is generally reserved for outlier cases, such as where a CEO receives very high incentive outcomes despite sustained TSR underperformance.

Where potential misalignment is identified, shareholders are better equipped to ask informed, constructive questions about remuneration design and decision-making. For companies, this presents an opportunity: remuneration committees that can clearly demonstrate how executive incentives are calibrated to drive long-term shareholder value will be well placed to build trust and support.

How Glass Lewis Uses the Model

Glass Lewis’ pay for performance analysis serves as the starting point in our assessment of remuneration proposals for S&P/ASX 300 constituents. Model scoring is never determinative of the overall analysis or recommendations. Instead, the model’s range of tests and overall score help to inform our contextual, case-by-case consideration of the company’s performance, remuneration structure and specific pay decisions, governance practices, level of explanatory disclosure and responsiveness to shareholders.

Looking ahead

Glass Lewis will apply the updated pay for performance scorecard across eligible S&P/ASX 300 constituents, with the coverage universe and peer sets rebalanced twice a year.