Welcome to the March 2008 issue of GuerdonNews®.
In this issue we provide advance notice that the government will be changing remuneration disclosure requirements, provide some compelling ideas to lift non-executive director shareholdings, examine why mining company CEOs are not paid for performance, and list executive severance requirements promulgated by UK governance groups.
We conclude with the latest on executive and director remuneration disclosure updates available on the GuerdonData® on line database.
Government to change executive remuneration disclosure requirements
The Minister for Superannuation and Corporate Law, Nick Sherry, wants more disclosure. He said investors want to know more.
They don’t. They just want to understand more. There is a difference. However, we know there is more that underlies Mr. Sherry’s words than just requiring “more”.
In a speech to ASIC's Summer School delivered by Treasury Secretary Ken Henry on behalf of Minister for Superannuation and Corporate Law, Nick Sherry, it was announced that Treasury is “reviewing executive remuneration”. Specifically, Mr. Henry (on behalf of Mr. Sherry) said:
“As you are aware, executive remuneration is an issue that generates much public and media interest. You would also be aware that investors — and the broader community — are demanding to know more about executive remuneration.
“While the Government does not seek to intervene in setting remuneration levels — a task that is best left with management — it believes that executive remuneration should be linked to company performance.
“The Government is also committed to promoting greater transparency and accountability with respect to executive remuneration packages.”
We followed up with Treasury and can confirm that there are disclosure requirements changes afoot. And the government's 2007 election platform provides more than a hint of what these may be.
Compelling ideas for providing non-executive directors with more equity
And no director margin loans are required!
As noted in the above article, the recent furore over directors’ margin loans secured against company stock will probably result in an additional disclosure burden. But there may be easier and less controversial ways for directors to own shares in the companies over which they have such a direct influence.
The 2008 Remuneration Forum for institutional investors, directors and executives, sponsored by Guerdon Associates and CGI Glass Lewis, was held last month at Allens Arthur Robinson’s Melbourne premises. Feedback from participants on presentations and the forum discussions was overwhelmingly positive. While we will provide a detailed communiqué from these proceedings in next month’s GuerdonNews® (and on our website in the interim), this month we are able to provide you with compelling ideas for director remuneration presented by one of the directors at the Forum.
Mining for CEOs’ performance pay
A study of mining industry Chief Executive remuneration reveals that pay is not much at risk due to performance.
We identified 30 ASX 300 Chief Executives from the mining industry, with market capitalisation ranging from $367 million to $5 billion.
Reflecting the fact that salaries are not evenly distributed across the industry, our analysis found that the average fixed remuneration for Mining CEOs of $AUD773,516 was greater than the median rate of $AUD592,147.
The distribution of Mining CEO total pay was also skewed, with the average of $AUD1,153,524 exceeding the median rate of $AUD883,187.
Executive contracts and severance guidelines
Many aspects of Australian executive remuneration are governed by standards that originated in the UK. Recently the two major groups representing institutional investors in the UK updated their joint statement on executive contracts and severance.
Their statement, first published in 2002, assists companies with the design and application of contracts for when senior staff depart. Shareholders also use it when assessing whether a situation exists where failure is being rewarded.
The guidelines could be a useful checklist for Australian boards and remuneration committees.
Latest GuerdonData® Updates
This month’s updates to GuerdonData® include disclosures from the following 13 companies:
BABCOCK & BROWN COMMUNITIES GROUP, BABCOCK & BROWN POWER, BLUESCOPE STEEL LIMITED, CORPORATE EXPRESS AUSTRALIA LIMITED, FLEXIGROUP LIMITED, GINDALBIE METALS LTD, GOODMAN GROUP, HENDERSON GROUP PLC, LION SELECTION LIMITED, MIRABELA NICKEL LIMITED, MACQUARIE COMMUNICATIONS INFRASTRUCTURE GROUP, THE REJECT SHOP LIMITED, and WOODSIDE PETROLEUM 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.
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