GuerdonNews Volume 2 Number 9

October 2006

Dear [FIRSTNAME],

Welcome to Guerdon Associates’ October 2006 newsletter.

In this edition, we survey practices and products in regard to executive option plan hedging, look at the practice of bonus deferral in the form of shares, examine board remuneration committee memberships, the function of this committee and the role of the committee chair, speculate that employee equity may be filling a hole in national accounts data, look at changes to taxation on termination payments that may impact executives and directors, and clarify some of Treasury’s refinement of budget superannuation announcements. We finish with the latest on the daily updates on director and executive remuneration disclosures in GuerdonData®, and mentions of Guerdon Associates in the news media.

Trimming the Hedges: Company Policies on LTI Hedging

In our previous article on “Hedging your Bets”, we discussed the Treasury’s proposal to the AASB requiring companies to disclose their option hedging policies.

This time we look at a typical hedging product, what companies are doing in regard to hedging policies, identify regulations that lobbyists want changed, and note areas that companies should look out for.

Deferring Bonus For Shares – Well Worth Considering

A growing practice in Australia is to hold back some of the executive’s bonus in shares.

In a recent study Guerdon Associates found that 70% of the ASX 20 and ASX 100 Resources companies have executive STI deferral features as part of their design.

Remuneration Committees With The CEO As A Member

Guerdon Associates recently extracted the remuneration committee membership data for the ASX 300 from GuerdonData®.

We were surprised at the results.

Chairman of the Remuneration Committee? Now What?

Remuneration expertise is not usually at the top of the list for filling board seats.

So many directors appointed to the chair role of the remuneration committee may feel at a loss. To assist, we have prepared a job description below.

Remuneration Committee Checklist

Many company boards are struggling to ensure their remuneration committees lift their game in order to achieve a high affirmative vote by shareholders to accept the remuneration report.

Below is a checklist that we thought may assist in setting and evaluating the remuneration committee.

National Accounts Data Indicates Employees Getting More Than Cash

Buried in the national accounts data released on September 6 was the rather frightening statistic that “wages and other employee contributions” increased 2% in the June quarter.

This was significantly more than other wages indices. This supports the view that employers are using tools other than wages (i.e. the “other employee contributions” component of the national accounts figures) to attract and retain staff.

Super Not So Duper for Expats

Australian expat executives often make the ideal recruits to run Australian companies.

They have had broad exposure to global business practices, and are culturally attuned to the home as well as international markets. But, as we have noted before, our tax system does them no favours.

Tax on Termination Payments

Treasury recently clarified taxes on superannuation payments as an outcome of the last budget.

Superannuation benefits and employer ETPs have been counted together for assessment against Reasonable Benefit Limits. The decision to remove RBLs for superannuation has caused a review of the taxation of employer ETPs, with focus on the application of an upper limit on the amount of employer ETPs that receive concessional tax treatment. This has major implications for executives and directors who have ETPs as part of their employment agreements.

Simplified Superannuation Contribution Rules

Our July 2006 Newsletter outlined the Government’s initial Budget proposals regarding contribution rules.

The final rules and transitional arrangements were released on 5 September 2006.

Latest GuerdonData® Updates

This month’s updates to GuerdonData® include disclosures from the following 81 companies:

ADELAIDE BANK LIMITED, ALLCO FINANCE GROUP LIMITED, AMADEUS ENERGY LIMITED, AMALGAMATED HOLDINGS LIMITED, AMCOR LIMITED, ANSELL LIMITED, ARB CORPORATION LIMITED, AUSTRALIAN GAS LIGHT COMPANY (THE), AUSTRALIAN PIPELINE TRUST, AUSTRALIAN STOCK EXCHANGE LIMITED, BABCOCK & BROWN ENVIRONMENTAL INVESTMENTS LIMITED, BABCOCK & BROWN INFRASTRUCTURE GROUP, BALLARAT GOLDFIELDS NL, BAYCORP ADVANTAGE LIMITED, BHP BILLITON LIMITED, BILLABONG INTERNATIONAL LIMITED, BOLNISI GOLD NL, BOOM LOGISTICS LIMITED, BORAL LIMITED, BRAMBLES INDUSTRIES LIMITED, BURNS PHILP & COMPANY LIMITED, CENTRO PROPERTIES GROUP, CENTRO RETAIL GROUP, CIRCADIAN TECHNOLOGIES LIMITED, CITY PACIFIC LIMITED, COATES HIRE LIMITED, COLLECTION HOUSE LIMITED, COMMANDER COMMUNICATIONS LIMITED, COMMONWEALTH BANK OF AUSTRALIA, CONSOLIDATED MINERALS LIMITED, CSL LIMITED, DB RREEF TRUST, FLIGHT CENTRE LIMITED, FOSTER'S GROUP LIMITED, FUTURIS CORPORATION LIMITED, GLOUCESTER COAL LTD, GUD HOLDINGS LIMITED, GWA INTERNATIONAL LIMITED, HILLS INDUSTRIES LIMITED, INSTITUTE OF DRUG TECHNOLOGY AUSTRALIA LIMITED, INVESTA PROPERTY GROUP, JB HI-FI LIMITED, JUBILEE MINES NL, LEIGHTON HOLDINGS LIMITED, LEND LEASE CORPORATION LIMITED, MACQUARIE GOODMAN GROUP, MAXITRANS INDUSTRIES LIMITED, METABOLIC PHARMACEUTICALS LIMITED, MULTIPLEX ACUMEN PROPERTY FUND, NEWCREST MINING LIMITED, OAMPS LIMITED, PACIFIC BRANDS LIMITED, PLATINUM CAPITAL LIMITED, PMP LIMITED, PUBLISHING & BROADCASTING LIMITED, QANTAS AIRWAYS LIMITED, REPCO CORPORATION LIMITED, SAI GLOBAL LIMITED, SEEK LIMITED, SIRTEX MEDICAL LIMITED, SKILLED GROUP LIMITED, STOCKLAND, SUNCORP-METWAY LIMITED, SUPER CHEAP AUTO GROUP LIMITED, SYMBION HEALTH LIMITED, TECHNOLOGY ONE LIMITED, TELECOM CORPORATION OF NEW ZEALAND LIMITED, TELSTRA CORPORATION LIMITED, THAKRAL HOLDINGS GROUP, TISHMAN SPEYER OFFICE FUND, TOLL HOLDINGS LIMITED, TRANSURBAN GROUP, UNITED GROUP LIMITED, VALAD PROPERTY GROUP, VENTRACOR LIMITED, WATTYL LIMITED, WESFARMERS LIMITED, WESTERN AREAS NL, WOOLWORTHS LIMITED, WORLEYPARSONS LIMITED, WOTIF.COM HOLDINGS LIMITED.

Executive and director remuneration data from all ASX 300 companies on GuerdonData® is available to any subscriber. Visit our website for more information on GuerdonData®.

Assess how easily you can find out director and executive pay information by viewing our 6 minute demo. Click on the “More Info” button below.

Guerdon Associates In The News

"Tax Breaks Fail to Attract Best Executives", Australian Financial Review, 2 October 2006, p 39.

Moscaritolo, M 2006, “Payday Millionaires”, The Advertiser, 29 September, p 19.

Newman, G 2006, “Telstra’s Bonus to Trujillo, Consultant Fees ‘Excessive’”, The Australian, 29 September, p 21.

“Big Deals”, Eureka Report, 08 September 2006.

Disclaimer

The information, analysis and opinion in this e-mail and attachments are intended to be for informational purposes only. Analyses are based on information taken from public documents or private surveys, and we do not represent to its accuracy. Guerdon Associates assumes no liability for the use or interpretation of information contained herein. This publication is provided 'as is' without warranty of any kind, either expressed or implied, including, but not limited to, the implied warranties of marketability, fitness for a particular purpose, or non-infringement of third party rights.

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Copyright © 2006 Guerdon Associates

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