Welcome to Guerdon Associates’ February 2007 newsletter.
In this first monthly issue of 2007 we review an interesting method of providing share options that provides employees with better value than regular options, research the extent that performance and executive pay may be linked, demonstrate how a respected UK governance body has not enhanced its reputation with ill considered director pay guidelines, and describe how French executive pay delivers more “oohlala” than the Australian variation.
We finish with mentions of Guerdon Associates in the news (yes – we did work over the summer break!), and the latest disclosure and remuneration data updates to GuerdonData®.
Do Executive Pay Increases Really Reflect Corporate Performance?
Prior to Guerdon Associates’ research there have been very few studies on the relationship of executive pay with company performance using Australian data.
Of the three non-Guerdon studies we know of with reasonable methodology, one was inconclusive, one indicated that there was a relationship, and one indicated that there was not a relationship. The last study by Guerdon Associates focussed on share ownership, and indicated a relationship in some industries and in larger companies. Since then we have tackled the question with a different methodology and found that there is evidence supporting the contention that companies do pay for performance.
Google’s New Method For Share Options – Okay For Australian Companies?
In December, Google announced a groundbreaking plan to let non-executive employees sell vested stock options to the highest-bidding investment bank.
In one stroke, such a plan, if adopted in Australia, would get around proposed ASX and Treasury hedging provisions, while being very appealing to employees.
Tighter Governance Requirements – Digressing From Good To Ridiculous?
There may be a lesson for Australia’s own governance organisations as a result of the misplaced zeal of a UK counterpart.
The two most influential British governance organisations are the National Association of Pension Funds (NAPF) and the Association of British Insurers (ABI). Late last year the ABI released new governance guidelines. Some aspects of the guidelines do little to enhance their credibility, and may encourage more of its members to independently develop their own, divergent, guidelines. It may be wise for Australian governance groups to take heed.
Vive La France – But Mon Dieu, Those Aussies Are Catching Up
The main proxy firm in France has released its annual report on executive remuneration.
As is usual in France, it seems, not much has changed from a decade ago. Not so in Australia. It seems that whereas Australian executive pay was about 60% that of France a decade ago, this is not the case now.
Latest GuerdonData® Updates
This month’s updates to GuerdonData® include disclosures from the following 24 companies:
ALLCO FINANCE GROUP LIMITED, AWB LIMITED, LION NATHAN LIMITED, NATIONAL AUSTRALIA BANK LIMITED, PEPTECH LIMITED, TIMBERCORP LIMITED, TOWER 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
Michael Robinson, “Executive Long-Term Incentives and Performance Measurement”, Keeping Good Companies, pp 692-693, December 2006
Richard Webb, “Executive Pay Packet Racket”, The Age, January 14, 2007
Liam Walsh, “Pay Rises Outstrip Profits”, The Courier-Mail, January 15, 2007