Welcome to the February 2009 issue of GuerdonNews®

What a year we all have ahead of us!

So, in this issue we start off with our predictions and aspirations for the year (or two) ahead, give you an update on what will be a far reaching annual remuneration forum for non executive directors, institutional investors and executives we (with CGI Glass Lewis and Allens Arthur Robinson) have held so far, provide an example of another bank’s pay response to the credit crisis, list the characteristics model remuneration committees should aspire to, and inform you of another accounting standard change with which you will need to comply.

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.

Changes to expect for board and executive remuneration in 2009 and 2010

The credit tsunami engulfing the world has precipitated, and will continue to precipitate, long-lasting changes across our global economy.

While executive remuneration regulation, governance and practice has been subject to change since the beginning of the new millennium, the massive impacts of the financial meltdown will not only accelerate this change, but also introduce new elements not previously contemplated.

This article dusts off our crystal ball and predicts what these will be, how they will happen and the market’s likely response.

2009 Remuneration Forum – APRA, ASIC and Senator Sherry to reveal all to institutional investors and board directors on March 16?

Speakers and panellists have been finalised for the 2009 Remuneration Forum.

The Forum is open to non executive directors, institutional investors, and executives, and is sponsored by Guerdon Associates and CGI Glass Lewis, and is hosted by Allens Arthur Robinson.

On this occasion, we are also inviting the regulators. However, to ensure free and frank exchange of views between these stakeholders, Chatham House rules apply and news media are excluded.

As with past Forums, there is a broad range of executive and director pay issues to discuss. But given the global push for more regulation, time is being made for regulators to provide advance notice of their thinking, and institutional investors and boards to respond. If you think there is too much regulation, not enough, or that current regulation is misdirected, or that future regulation must avoid becoming prescriptive, or that shareholders should or should not have a say in a company’s operational matters, now is the time to let your views be heard!

Remuneration committees – a checklist to assess how yours compares with the best

The introduction of executive remuneration disclosure requirements, shareholder voting on the remuneration report and the sensitivity of pay issues in a savagely declining market have thrust remuneration committees into the spotlight.

The best of these committees are seeking to transform themselves from a relatively low-key and reactive role to being initiators of changes in policies to support the business and anticipate its challenges and future needs.

As a guide, in this article we present our observations on the best remuneration committees. These observations can be used as a checklist for assessing the performance of your own committee.

Sub-prime bonus – Credit Suisse’s approach

In our last newsletter we published details of UBS’s response to executive remuneration issues.

While other overseas-based banks have also responded, we have not provided you with the details because, frankly, the response has been tepid, lacking imagination, or has been a re-hash of old plans that do not adequately address the twin issues of risk management and reward. We decided to distribute details of the UBS response because it was innovative, responded directly to regulators concerns, workable (with some serious qualifications), and most likely benefited from inside knowledge of the likely global regulatory associations’ recommendations to G20.

In this issue we make another exception, if only to underscore the asymmetry of a response that could cause it to go seriously wrong.

APRA speaks (a little more…)

As noted in prior newsletters, the Australian Prudential Regulation Authority (APRA) mentioned the role executive compensation played in the financial crisis overseas a good 8 months before its impact was felt here.

It is now casting its spotlight on executive remuneration packages paid by financial institutions in an effort to curb excessive risk taking.

APRA is developing a principles-based framework for executive remuneration structures in line with Prime Minister Kevin Rudd's announcement in September of policy actions on executive remuneration designed to avoid risk taking.

New AASB 124 compilation issued

The AASB has issued a new compilation of AASB 124 Related Party Disclosures

AASB 124 was originally issued on 20 December 2005.

The changes made in this latest compilation are the inclusion of the amendments made by AASB 2008-4, issued on 6 June 2008, which, following the inclusion of similar requirements in section 308 of the Corporations Act 2001, removed the need for disclosing entities that are companies to provide detailed key management personnel remuneration disclosures in both the remuneration report and notes to the financial statements.

Latest GuerdonData® Updates

Updates to GuerdonData® include disclosures from the following 25 companies:

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED, AQUILA RESOURCES LIMITED, AQUARIUS PLATINUM LIMITED, BANK OF QUEENSLAND LIMITED, INCITEC PIVOT LIMITED, LION SELECTION LIMITED, MACARTHUR COAL LIMITED, MOLY MINES LIMITED, NATIONAL AUSTRALIA BANK LIMITED, NRW HOLDINGS LIMITED, ORICA LIMITED, ST GEORGE BANK LIMITED, TOWER AUSTRALIA GROUP LIMITED, TEN NETWORK HOLDINGS LIMITED, VIRGIN BLUE HOLDINGS LIMITED, WESTPAC BANKING CORPORATION, ARANA THERAPEUTICS LIMITED, ABB GRAIN LIMITED, AUSTRALIAN PHARMACEUTICAL INDUSTRIES LIMITED, AWB LIMITED, GRAINCORP LIMITED, GREAT SOUTHERN LIMITED, LION NATHAN LIMITED, TIMBERCORP LIMITED, and 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

“Why Pay More to Execs Who Fail? BTalk Australia”, Phil Dobbie interviews Michael Robinson, 4 December 2008, http://blogs.bnetau.com.au/aussierules/2008/12/04/why-pay-more-to-execs-who-fail-btalk-australia/

“Snouts in trough as directors party on”, Florence Chong, The Australian, 27 December 2008, http://www.theaustralian.news.com.au/business/story/0,,24845084-36418,00.html