The Australian Financial Review‘s annual executive salary review makes for fantastic reading — if you’re an executive or wannabe executive of a large, listed company. If you’re a shareholder, not so much. Despite going through a financial crisis, share prices falling by around 40% since their 2007 highs and the much vaunted “two strikes” rule, it appears boards are unwilling to show a great deal of restraint in paying their top brass.

The Australian experience isn’t altogether different to what has happened in the US. As Bill Bonner noted: “The Economic Policy Institute calculates that the typical worker got a real salary increase of only 5.9% over the last 30 years … But executive pay rose 127 times as much. Today, the execs earn about 206 times as much as the workers. Why? Are executives really so much more valuable than they used to be?”

In most cases, senior executives contribute minimal to no value to shareholders. Perversely, the larger the company, the less value they directly contribute (bigger companies have more senior executives and pay more for consultants, lawyers and bankers). Of course, bigger companies also tend to make more nominal profit, that means directors can divert shareholder money to executives without having a material effect on individual owners — steal a little bit from a lot of people, and usually, no one really notices.

The usual suspects remain at the top of the CEO pay list. Ignoring Coles chief Ian McLeod (who’s not actually considered a CEO), Mike Smith topped the list with $9.6 million in pay. This amount actually understated how much he really collected, which was actually $12 million, courtesy of prior year options. Gail Kelly wasn’t far behind on $9.6 million, while NAB boss Cameron Clyne took home $8.8 million, despite NAB reporting a 22% profit drop.

Bank salaries remain obscene not merely for their quantum but, largely, because there are few easier jobs in Australian than running a bank. They operate in a legislate oligopoly with minimal real competition (the GFC sorted out those pesky non-bank lenders) and critically, the banks are backstopped by government guarantees, so they can’t go broke even if they wanted to. It wouldn’t be an unfair argument to suggest that the big four banks could sack their entire management teams, save $40 million annually, and not see any difference in performance.

The other usual culprits: the mining twins, BHP and Rio Tinto, continued their prolifigateness. Despite failing at pretty much every capital allocation he’s ever made, BHP boss and former McKinsey consultant Marius Kloppers collected $9.5 million. Kloppers even got a $1.5 million bonus, despite overseeing the disastrous shale gas acquisition in the US which cost shareholders $2.8 billion. The shale gas disaster was hardly Kloppers’ first faux pas — the South African wunderkind also made a mess of the Rio Tinto takeover, missed out on Potash and undertook an ill-fated buyback which cost shareholders another $2 billion.

It’s hard to see how Kloppers, and his overpaid team of executives (coal boss Marcus Randolph gets $6.2 million; corporate development chief Alberto Calderon $5.9 million, Mike Yeager the oil boss got $5.1 million and even the HR chief Karen Wood collected $4.6 million) could actually have performed any worse.

“The theme is clear: the best performing CEOs, with the toughest jobs in super competitive sectors, are able to create real earnings growth.”

Rio Tinto boss Tom Albanese who in certain countries would have possibly been executed for his $30 billion Alcan folly, took home $8 million, despite Rio shareholders witnessing a return of negative 30%

Macquarie chief Nicholas Moore collected a relatively paltry $7 million. Relative in a sense that Moore and his former boss Allan Moss would regularly collect $30 million from shareholders in the hefty days of the credit boom. Moore’s remuneration (together with the next five most senior Macquarie employees who collectively took home $34 million) would be more tolerable if he wasn’t running an organisation generating a return on equity of 6.8% and reporting a profit drop of 24%. Macquarie’s return on equity is so bad, it’s shareholders would get a similar return popping their money in a Macquarie term deposit than investing in a risky investment bank.

Origin Energy boss Grant King, another long-time recipient of burgeoning remuneration, took home $8.4 million, inclusive of a $2.4 million short-term bonus. The Origin board, led by Macquarie chairman Kevin McCann, appears to pay scant notice of shareholders given that Origin shares have slumped by 38% in recent years to sit at a four year low. Origin blames regulatory decision in Queensland and South Australia for reducing profit. It appears that good profit performance at Origin is caused by their talented executives like King, but bad performance is the fault of anonymous regulators. In both cases, shareholders suffer.

As is typical, the best performing CEOs in 2012 were paid far more reasonable salaries. Oroton’s Sally McDonald, who has delivered consistent profit growth (and this year faced the external challenge of losing a major licence) took home only $1.04 million. Fleetwood boss Stephen Price was paid only $857,000, despite the company returning almost 70% to shareholders last year. Domino’s chief Don Meij oversaw shareholder returns of 46% but was paid a relatively paltry $1.2 million. REA’s Greg Ellis was paid $1.2 million to head realestate.com.au and Robbie Cook was paid $1.5 million at the successful Wotif (who return 24% for shareholders).

The theme is clear: the best performing CEOs, with the toughest jobs in super competitive sectors, are able to create real earnings growth. They take calculated risks and make shrewd capital allocation decisions to deliver shareholder return and receive relatively low salaries. It’s the “name brand” executives, those running banks or international mining companies or unwieldy conglomerates who tend to deliver the worst performance and receive the highest remuneration. The fault lies clearly on the boards of companies like BHP or Westpac — who fail to understand what executives do and the value they contribute.