Welcome to Guerdon Associates’ July 2007 newsletter.

And happy new financial year to many of our Australian subscribers.

We start this month’s newsletter with the great news that Guerdon Associates will be opening its Melbourne office later this month. Also in this month’s newsletter we report on an additional disclosure requirement hidden in the government's “simpler” regulatory requirements bill, report on the historic get together we organised (with proxy firm CGI Glass Lewis) between investors and company boards and executives, examine market standards of pay equity that boards could adopt in order to reduce risk, and, in two articles, look at the practicalities of private equity pay in public companies.

We conclude with the latest executive and director remuneration disclosure updates available on the GuerdonData® on line database, as well as the month's news media featuring Guerdon Associates.

Historic Forum Reconciles Pay Issues Between Investors and Companies

In an Australian first, over sixty institutional investors, directors and executives convened on 29 May to discuss the vexed issue of board and executive pay levels, structures and disclosure.

We sponsored the forum jointly with proxy advisor CGI Glass Lewis, which was hosted by law firm Allens Arthur Robinson in Sydney.

We were delighted with the outcome. The proxy firm CGI Glass Lewis agreed that its proxy advice would give latitude to executive remuneration innovations that diverge from investor guidelines. But it was not all a one-way street.

New “simplification” law requires more executive pay disclosure!

Remember last month’s rah-rah from the government about simplifying the Corporations Act?

They forgot to mention the complicated bits. In fact, the new bill requires directors to disclose more in their remuneration reports.

Regular readers will recall that we first flagged over a year ago that the government was to introduce anti-hedging regulation in regard to executive incentive pay and that we provided regular updates on its progress.

So we were understandably perplexed that the government failed to announce that this was to be in their Simpler Regulatory System Bill that we brought to your attention in the last issue. We suspect that the government's ommission was not an accident. It is incongruous with their message that they are trying to reduce the regulatory burden on business.

Executive Pay Equity – Pay Distribution in the ASX 300

The absence of “appropriate” internal pay equity can create or imply multiple risks, including turnover in senior management, the absence of internally developed CEO successors, the presence of a “too powerful” CEO and even theft and fraud.

Credit rating agencies such as Moody’s take this into account, and pay equity can have a direct impact on a company’s cost of capital. But what is an “appropriate” level of pay equity?

Private Equity Pay For Public Companies

One of the absurdities of governance guidelines is that private equity executive pay would never pass muster for public companies because it is outside the parameters supported by institutional shareholders, proxy firm advisers and governance groups.

It is absurd because private equity, when it is done well, is a governance business. It is all about creating a new and better model of management than exists in a typical public corporation.

What follows is an opinion piece by Michael Robinson of Guerdon Associates, published recently by the Australian Financial Review.

Chairman comes under fire for private equity bonus scheme

Shareholders at UK company Cable & Wireless are preparing to oppose the reelection of the company's chairman Richard Lapthorne.

Mr. Lapthorne came under criticism two years ago when he steered through a controversial private equity style LTI plan for Cable and Wireless top executives. These shareholders have since benefited from the rocketing share price and turn around engineered by these same executives and Mr. Lapthorne’s board. Now they are at it again.

ASX Corporate Governance Council's revised Principles for Good Corporate Governance Practice

These were to be released in "late June".

However, they have been delayed. Our contact at the ASX said that the sheer volume and variety of submissions has necessitated a delay. At a Council meeting late last week it was resolved to release the revised principles later this month, pending confirmation of an appropriately high profile individual's availability to promote the release.

The unofficial release date has been now set for July 30. If they manage to stick to this new date we will be able to provide you with the detail (and maybe a point of view) with our newsletter scheduled for 7 August.

Guerdon Associates to open Melbourne office

It has been our intent since we were established to have offices in both Melbourne and Sydney.

Unfortunately, as our clients will agree, finding the right people to provide advice on high profile, sensitive and often materially significant executive and board remuneration matters is difficult. But we have always been clear on the few outstanding people with the right credentials. Now circumstances have aligned.

Our new office will open in late July, and be located at 470 Collins Street. It would be premature to provide more detail in this issue, but we will shortly.

If you need to know more, contact Peter McAuley, +612 9270 2912, or email Peter at peter.mcauley@www.guerdonassociates.com.

Latest GuerdonData® Updates

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

CSR LIMITED, PROGRAMMED MAINTENANCE SERVICES LTD, RINKER GROUP LIMITED, SP AUSNET

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

“Guidelines for Share and Options Issues”, The Boardroom Report, The Australian Institute of Company Directors, Volume 5, Issue 9, 5 June 2007, p.4
“Peace”, The Global Proxy Watch, Davis Global Advisers Inc, Vol XI Number 25, 22 June 2007