Just before Christmas, as staff put on Hawaiian shirts and went to Christmas lunches HR hoped didn’t create more work for them, New Zealand ASX-listed accounting platform Xero (ASX: XRO) dropped details on a new pay plan for CEO Sukhinder Singh Cassidy.
The December 18 release, titled “Xero CEO pay revised, aligns to performance and global peers” initially looked like executive pay in tougher times was facing its own austerity measures.
The new pay packet led with “A reduction in base salary and associated target STI (short term incentive) from US$735,000 to US$540,000 each with effect from 1 April 2025”, noting that the STI was 100% of base salary.
That’s around three-quarters of what Richard White pays himself to run WiseTech, while also owning a third of the stock.
Then came the kicker after the announcement talked about Singh Cassidy’s “remuneration to recognise her strong performance” – total shareholder returns in less than two year after she became CEO were up 161% – and the board wanted her pay to be “appropriately aligned to market benchmarks for globally comparable technology companies”.
Singh Cassidy signed on with Xero in November 2022, becoming CEO in February 2023. Steve Vamos had just stepped down as CEO after 5 years when the company posted losses and the share price sat at around $70. She cut 800 jobs, around 15% of the workforce, after taking the helm and then sold off invoice lender Waddle to CBA for $80m six months later.
The company praised revenue growth above 20%, increased free cash flow margin to 21%, and a Rule of 40 (the SaaS benchmark of success) of 41.0% and 43.9% in FY24 and H1 FY25 respectively.
Xero chair David Thodey said: “The Board is committed to linking pay with performance, and attracting and retaining global talent to achieve our global strategy and aspirations for Xero”.
He argued that “Recruiting and retaining global SaaS leaders — a concentration of whom are US-based — in a competitive international market is essential to delivering the high performance we need to drive long-term shareholder value.”
Then came the fine print: an increase in the total Long Term Incentive (LTI) and Long Term Equity (LTE) target opportunity for FY26 to US$14.12 million (A$22.8m), with an annual total target remuneration will increase to US$15.2m ($24.6m).
But wait, there’s more.
The CEO also scored a one-off grant of 575,000 ‘at-the-money’ options with an exercise price of A$171.11 – the price at market close on Dec 17 last year – equal to a fair value of US$26.49m (A$42.85m).
The options vest in three equal tranches annually following the grant date.
Xero shares dropped below $115 around 12 months ago and peaked above $180 in early February before the US President tanked markets globally last week with his tariff plans. XRO dropped below $150 but has recovered as the Orange Swan event flaps his wings in another direction.
Now I don’t know what Xero pays its workers, but most sites say the average salary is below $100k, with many late last year suggesting it’s around $77,000.
If that’s the case, the Xero CEO is on around 320x of her average worker.
The average CEO-to-worker pay ratio fell in 2023 to 268-to-1 for S&P 500 Index companies. It was 324-1 in 2021.
My personal Xero subscription now costs me around $35 a month. That means around 59,999 others have to pay the same as me, just to cover her salary – and I suppose another 6000 for the superannuation.
Macquarie Group CEO Shemara Wikramanayake is Australia’s highest-paid CEOs, banking $29.4m in 2024. The banker has a market cap around $70 billion. Xero is worth around $24bn.
Singh Cassidy was listed as Australia’s 35th best paid CEO of 2024 on $6.73. But this pay deal makes CBA boss Matt Comyn on $7.17m running a $260bn bank with earnings per share (EPS) of $3+ look like a bargain boss. Xero’s EPS is a 10th of CBA’s at around the same price.
Seek CEO Ian Narev is on around $5m with a base salary of $1.9m. Seek’s EPS is $0.22 cents. The shares are worth around $21.
Boards say they do this for the shareholders, which is their duty, but is the Xero boss 3x more valuable than the head of Australia’s biggest bank?
And is the Xero board saying there’s no executive in Australia capable of delivering shareholder value while also offering better shareholder value and thus they need to meet the US market on executive pay?
There’s no doubt that Singh Cassidy is doing a great job at Xero. But as incentives go, is skewing the job she’s paid to do towards jacking up the share price the right way to go about it?
As the late Charlie Munger from Berkshire Hathaway observed: “Show me the incentive, and I’ll show you the outcome.”
This figure is enough to make even Ruslan Kogan blush, although his story as Kogan.com’s cofounder, key shareholder and boss is a reminder of the swings and roundabouts of corporate life.
After being Australia’s third highest paid executive in 2023, taking home $17.2m, that fell to $2.2m as Kogan.com shares dropped to a six-year low under $5.
Who knows where Xero’s share price will head in the Trump era. But this Cozzie Livs writer is looking around for an accountancy platform subscription with a more affordable CEO.
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