How firms determine the pay of their executive employees is a vital research area.

In the Australian context, mining firms form a large portion of listed companies. These miners tend to have more volatile earnings, operate with less certainty and higher risk in relation to capital investment.

The research looks at a sample of ASX listed miners and non-miners from 2005 to 2013. It notes that miners pay their CEOs less (AUD 1 m vs AUD 1.5 m for non-miners) overall. However, it is also noted that miners tend to use enhanced contingent long-term remuneration arrangements to significantly boost the pay-performance relationship compared to non-miners particularly during the pre-GFC period. Curiously, non-miners tend to have more generous short-term contingent arrangements linking executive pay and performance. The GFC, as an event, has adversely impacted these arrangements, lessening the generosity of pay-performance among miners, while enhancing these arrangements among non-miners.

Overall, the results of the study provide support for optimal contracting theory and do not generally support the managerial power approach for both mining and non-mining firms.

Yarram, S. R. & Rice, J., (2017). Executive compensation among Australian mining and non-mining firms: Risk taking, long and short-term incentives, Economic Modelling, 64, pp. 211-220.