GuerdonNews® Volume 4 Number 8

September 2008

Dear [FIRSTNAME],

Welcome to the September 2008 issue of GuerdonNews®.

Welcome to the September 2008 issue of GuerdonNews®.

In this issue we provide remuneration committees with a checklist for appointing their remuneration adviser, provide a welcome update on the government’s change of heart on superannuation for foreign executives and skilled workers, remind board nomination committees of the best sources of new CEOs in times of turnover, review a “reasonable” remuneration legal action that was dropped, and advise the latest share plan tax changes.

We conclude with the latest on executive and director remuneration disclosure updates available on the GuerdonData® on line database and references to Guerdon Associates in the news media.

What the remuneration committee should expect of their external adviser – a checklist

Section 189 of the Corporations Act, in effect, encourages directors to seek external expert opinion.

With executive remuneration disclosures and remuneration report voting, most ASX 300 companies’ boards now consider some form of advice from external remuneration experts.

In establishing new working relationships with board remuneration committees we have encountered mutual surprise. On our part, we are taken aback by the low expectations some remuneration committees have of their advisers, and on some of our clients’ part they are surprised by the extent of value and new perspectives an adviser can provide. Therefore, we have put together a checklist for remuneration committees in selecting and working with an independent adviser.

The checklist will be well suited to committees that recognise the need to adapt to governance trends, new shareholder expectations, additional compliance requirements, the rise of the proxy advisory firms and more complex business and capital strategies.

Government revisions to temporary resident superannuation plans make Australia more welcoming to foreign executives and skilled workers

Our July 2008 Newsletter reported the government’s proposal to impose a requirement that superannuation accumulated by temporary residents while working in Australia is transferred to the Australian Taxation Office annually.

Concerns were compounded by the government’s intention to pay no interest on the funds held by the ATO. We expressed our displeasure at the time, noting that such measures would make Australia a less desirable (if only temporary) destination for foreign executives and skilled workers.

Apparently, we were not the only ones.

High CEO turnover – outside CEO recruits deliver less than insiders

The past year or so has witnessed the biggest exodus of Australian company CEOs for some time.

Allco, ANZ, Aristocrat, Babcock and Brown, BHP Billiton, Centro, Challenger, Fosters, IAG, Lend Lease, Mirvac, NAB, Qantas, Rio Tinto, Santos, St. George, and Westpac, among others, have arranged a change in CEO or announced that one is imminent.

Booz & Company’s annual study of CEO turnover at the world’s largest companies reinforces earlier findings that externally appointed CEOs do not perform as well as internally appointed CEOs.

Government clarification on employee share scheme tax changes in the budget– including changed election requirements for $1,000 tax exemption

Readers will recall that the May 2008 Federal Budget included two measures affecting the tax treatment of shares or rights acquired under employee share schemes.

At the time there were media reports that the government was closing a loophole allowing executives to unfairly minimise tax. Media speculation that this measure would allow employees who receive multiple share and rights grants in a given tax year to elect to be taxed upfront on those grants for which they included details in their tax return for the year of grant, and to defer tax on the other grants, prompted us to write to the Government seeking clarification.

It only took two and a half months, but we did get a response.

Living in a land of harmony – payroll tax on employee share and option payments

When the governments of Australia agree with the principle of harmonising laws, regulations and taxes watch out, because this is not the same as choosing the lowest common denominator of all of these.

In regard to share, option and other equity plans the tax bill will (is there any other way?) go up.

You will be reassured to know that the entire country is now living in a state of harmony according to the payroll tax legislators.

Excessive executive compensation legal action dropped

In July, New York Attorney General Andrew M. Cuomo dropped his case challenging the nearly $190 million compensation package of former New York Stock Exchange chairman Dick Grasso, hours after a state appeals court dismissed the two remaining claims.

The case was interesting and relevant to Australian directors because the basis of the legal challenge was a New York state law specifying that not-for-profit remuneration should be “reasonable”. Australian directors are aware that section 211 of the Corporations Act also requires executive and director remuneration to be “reasonable”.

Latest GuerdonData® Updates

This month’s updates to GuerdonData® include disclosures from the following 14 companies:

AUSTAL LIMITED, ASX LIMITED, BILLABONG INTERNATIONAL LIMITED, BECTON PROPERTY GROUP, BIOTA HOLDINGS LIMITED, CHALLENGER FINANCIAL SERVICES GROUP LIMITED, FLEXIGROUP LIMITED, HEALTHSCOPE LIMITED, OAKTON LIMITED, PERPETUAL LIMITED, SUNLAND GROUP LIMITED, TELECOM CORPORATION OF NEW ZEALAND LIMITED, WORLEYPARSONS LIMITED, and DEXUS PROPERTY GROUP

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

“Big remuneration issues for boards”, Zilla Effrat, The Boardroom Report, Volume 6, Issue 15, 12 August 2008, p. 2

“People power ain’t always right”, James Kirby, The Age, 24 August 2008

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 © 2008 Guerdon Associates

ISSN 1834-8300

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