Welcome to Guerdon Associates’ November 2006 newsletter.

With this edition, you will be the first in Australia to view the annual rate of growth in remuneration for CEOs from the 2006 disclosures. It is also the first to comprehensively examine the draft changes to the ASX Governance Council’s recommendations as they impact director and executive pay and performance assessment. We also provide an update on the “reasonable pay” case against the former head of the New York Stock Exchange. 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.

Stop Press - CEO 2006 Pay Increases

As of just a few days ago, the majority of ASX 300 listed companies with financial years ending up to 30 September 2006 had released their annual reports with remuneration disclosures.

And, as in the past, GuerdonData® is the first publicly available database to capture the results. You, as a subscriber to GuerdonNews®, are the first to receive the latest trend analysis for CEO pay.

How Risky Is CEO Pay?

Sixty-seven percent of CEOs enjoyed an increase in total remuneration, while 30% suffered a decrease.

What is interesting is that at risk pay, rather than fixed pay, explains most of the movement in CEO total remuneration.

Top 10 Increases – Did They Earn It?

There will be much in the media in coming weeks about the rate of CEO pay increases.

There will be the usual debate about whether CEOs earned their increases.

Major Changes To ASX Good Governance Principles

Last Thursday (2 November 2006) the Australian Stock Exchange (ASX) released draft changes to The ASX Governance Council’s “Principles of Good Governance and Good Practice” for comment.

The requirement for ASX listed companies to disclose the extent of compliance with these new principles is due to go into effect from 1 July 2007. However, companies and other interested parties can comment on the draft until 9 February 2007.

ASX Governance Council Requires Evaluation Of Directors And Senior Executives

Accompanying the changes are notes from the ASX Governance Council on the background to each change.

Given this, we think it peculiar that nothing was mentioned in regard to several additional new recommendations. These include recommendations that companies evaluate the performance of directors and senior executives.

ASX Governance Council Removes Remuneration Disclosure Recommendation

Amongst all the additions to the ASX Governance Council’s recommendations, there have also been some deletions.

This includes the deletion of the recommendation to disclose executive and director remuneration. But this is not due to a change of heart by the Council that they think remuneration disclosure is not a worthwhile governance exercise. And the change will only, in effect, exempt a few companies.

ASX Governance Council Recommendation Requires That Many Companies Change Their Remuneration Committee

A major change in guidance for the recommendation that the board should establish a remuneration committee (this is Recommendation 9.2, but will be 9.1) is that the committee should be comprised only of non-executive directors.

The current version only requires that a majority be non-executive directors. As a consequence there are many companies where the remuneration committee membership includes executive directors.

ASX Governance Council Changes Catch Hedging Of Executive Options

Guidelines on senior executive pay composition are largely unchanged from the prior version of the guidelines except in one important respect.

Recommendation 9.2 (currently 9.3) is about distinguishing between the structure of senior executive and non-executive director remuneration.

ASX Governance Council Removes Guideline For Disclosure Of Non-Executive Director Retirement Benefits

It appears the wheel has turned.

It seems like it was only yesterday that there was a great deal of governance effort to reign in non-executive director retirement provisions. Now the ASX Governance Council’s draft guidelines for non-executive director pay no longer require disclosure of retirement benefits (presumably as this duplicates Corporations Act and AASB requirements).

ASX Council Unsure On Senior Executive Equity Pay

The ASX Governance Council admits it does not yet know what to do about senior executive director equity.

For the moment it has retained a slightly reworded Recommendation 9.3 (currently 9.4) that says companies should ensure that payment of equity-based executive remuneration is made in accordance with thresholds set in plans approved by shareholders.

ASX Governance Council And ASX Not Sure Where To Go On Director Equity

Recommendation 9.3 (currently 9.4) says companies should ensure that payment of equity-based executive remuneration is made in accordance with thresholds set in plans approved by shareholders.

The recommendation only makes full sense if all director equity requires shareholder approval.

Judge Rules Against Grasso

A state supreme court judge has ordered former New York Stock Exchange (NYSE) chief Richard Grasso to pay back some of the compensation package that the state's attorney general Eliot Spitzer has labeled excessive.

The lower court judge, who issued a partial summary judgment against Grasso, will decide separately how much he should repay from the $187.5 million compensation package and dismissed his claim for another $48 million from the exchange.

Healthy CEO Pay Inspires New Revelation Of Director Interest Conflict

Mr. Grasso’s pay of US$187 million on leaving as CEO of the NYSE pales in comparison with others.

Earlier this year, even blase US media hacks were stunned when it was revealed that United Healthcare’s CEO (Dr William McGuire) was sitting on executive stock options that left his US$128 million annual pay packet in the shade. The gain from his stock options was worth US$1.6 billion (that is no typo).

Latest GuerdonData® Updates

This month’s updates to GuerdonData® include disclosures from the following 137 companies:

AAV LIMITED, ABC LEARNING CENTRES LIMITED, ADSTEAM MARINE LIMITED, AGENIX LIMITED, ALE PROPERTY GROUP, AQUARIUS PLATINUM LIMITED, ARC ENERGY LIMITED, ATLAS GROUP HOLDINGS LIMITED, AUSPINE LIMITED, AUSTEREO GROUP LIMITED, AUSTRALIAN INFRASTRUCTURE FUND, AUSTRALIAN WEALTH MANAGEMENT LIMITED, AUSTRALIAN WORLDWIDE EXPLORATION LIMITED, BABCOCK & BROWN JAPAN PROPERTY TRUST, BABCOCK & BROWN WIND PARTNERS GROUP, BEACH PETROLEUM LIMITED, BENDIGO BANK LIMITED, BENDIGO MINING LIMITED, BLUESCOPE STEEL LIMITED, BRADKEN LIMITED, BRAZIN LIMITED, CABCHARGE AUSTRALIA LIMITED, CELLESTIS LIMITED, CENTENNIAL COAL COMPANY LIMITED, CHALLENGER FINANCIAL SERVICES GROUP LIMITED, CHARTER HALL GROUP, CHEMEQ LIMITED, CLOUGH LIMITED, COCHLEAR LIMITED, COFFEY INTERNATIONAL LIMITED, COLES MYER LIMITED, COMPUTERSHARE LIMITED, CONNECTEAST GROUP, CRANE GROUP LIMITED, CUE ENERGY RESOURCES LIMITED, DAVID JONES LIMITED, DCA GROUP LIMITED, DOWNER EDI LIMITED, DRAGON MINING NL, EMPEROR MINES LIMITED, ENERGY DEVELOPMENTS LIMITED, ENVESTRA LIMITED, EQUIGOLD NL, EXCEL COAL LIMITED, FAIRFAX (JOHN) HOLDINGS LIMITED, FKP PROPERTY GROUP, FLEETWOOD CORPORATION LIMITED, FORTESCUE METALS GROUP LTD, GENETIC TECHNOLOGIES LIMITED, GEODYNAMICS LIMITED, GLOBE INTERNATIONAL LIMITED, GOODMAN FIELDER LIMITED, GRAND HOTEL GROUP, GREAT SOUTHERN PLANTATIONS LIMITED, GUNNS LIMITED, HARVEY NORMAN HOLDINGS LIMITED, HASTIE GROUP LIMITED, HEALTHSCOPE LIMITED, HOUSEWARES INTERNATIONAL LIMITED, IBA HEALTH LIMITED, IINET LIMITED, INDEPENDENCE GROUP NL, INFOMEDIA LIMITED, INSURANCE AUSTRALIA GROUP LIMITED, INTEGRATED GROUP LIMITED, IOOF HOLDINGS LIMITED, JUST GROUP LIMITED, KAGARA ZINC LIMITED, KIMBERLEY DIAMOND COMPANY NL, KINGSGATE CONSOLIDATED LIMITED, KRESTA HOLDINGS LIMITED, LYNAS CORPORATION LIMITED, MACARTHUR COAL LIMITED, MACMAHON HOLDINGS LIMITED, MACQUARIE COUNTRYWIDE TRUST, MACQUARIE LEISURE TRUST GROUP, MACQUARIE OFFICE TRUST, MAYNE PHARMA LIMITED, MCGUIGAN SIMEON WINES LIMITED, MCPHERSON'S LIMITED, MFS LIMITED, MILLER'S RETAIL LIMITED, MINCOR RESOURCES NL, MIRVAC GROUP, MONADELPHOUS GROUP LIMITED, MOSAIC OIL NL, MOUNT GIBSON IRON LIMITED, MULTIPLEX GROUP, NORWOOD ABBEY LIMITED, NOVOGEN LIMITED, NUFARM LIMITED, NYLEX LIMITED, ONESTEEL LIMITED, ORIGIN ENERGY LIMITED, PAPERLINX LIMITED, PERILYA LIMITED, PERSEVERANCE CORPORATION LIMITED, PHARMAXIS LTD, PRIME TELEVISION LIMITED, PRIMELIFE CORPORATION LIMITED, PROGEN INDUSTRIES, PSIVIDA LIMITED, QUEENSLAND GAS COMPANY LIMITED, RAMSAY HEALTH CARE LIMITED, REBEL SPORT LIMITED, RESOLUTE MINING LIMITED, RESOURCE PACIFIC HOLDINGS LIMITED, RIDLEY CORPORATION LIMITED, SALLY MALAY MINING LIMITED, SALMAT LIMITED, SDI LIMITED, SENETAS CORPORATION, SEVEN NETWORK LIMITED, SIGMA PHARMACEUTICALS LIMITED, SILEX SYSTEMS LIMITED, SIMS GROUP LIMITED, SMORGON STEEL GROUP LIMITED, SMS MANAGEMENT & TECHNOLOGY LIMITED, SONIC HEALTHCARE LIMITED, SOUTHERN CROSS BROADCASTING (AUSTRALIA) LIMITED, SP TELEMEDIA LIMITED, SPOTLESS GROUP LIMITED, ST BARBARA LIMITED, SUNLAND GROUP LIMITED, SYDNEY GAS LIMITED, SYMEX HOLDINGS LIMITED, TABCORP HOLDINGS LIMITED, TATTERSALL'S LIMITED, TRANSFIELD SERVICES LIMITED, TRANSPACIFIC INDUSTRIES, UXC LIMITED, VILLA WORLD LIMITED, VILLAGE ROADSHOW LIMITED (PA), VISION GROUP HOLDINGS LIMITED, VISION SYSTEMS LIMITED, WEST AUSTRALIAN NEWSPAPERS HOLDINGS LIMITED, ZINIFEX 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

Stuart, D 2006, “Buying Your Way Into Trouble”, Company Director, October, p 30.