Welcome to the April 2009 issue of GuerdonNews®

In this issue we note the outcome of the G20 London meeting in relation to executive remuneration; report on Senator Sherry’s clarification of the government’s termination payment regulation; release the details of our Treasury submission to amend tax on unvested equity at termination; reveal that the reduction in the value of the company shareholdings of most ASX 100 CEO’s has approximated the value of their annual pay; note the convergence of global regulators on a set of rules to be enforced by the Basel Committee of Banking Supervision, even though it has been acknowledged that exec pay is probably only a minor element in the global meltdown; provide a snapshot of the rich, deep and constructive content of the Remuneration Forum for Australia’s top regulators, investors, non executive directors and executives; and describe the features of Regnan’s recently released executive remuneration model.

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.

Senator Sherry clarifies executive termination payment regulation

The Australian Minister for Superannuation and Corporate Law has clarified that the new regulation capping termination payments without shareholder approval would be in complete accord with the APRA regulation.

Specifically, Senator Sherry indicated that the definition of termination payments will exclude any long term incentive plans, with the exception of those that had accelerated vesting, which would be “banned” under the legislation. We expect that LTI plans with accelerated vesting on termination would be subject to shareholder approval.

Overall, however, we think the approach, as clarified by Senator Sherry, is a significant improvement on the initial press release, media interviews, and ministerial presentations.

G20 endorses FSF principles on pay and compensation

And they are not too shabby either.....

The ‘Declaration on Strengthening the Financial System’ issued by the G20 leaders on 2 April 2009 endorsed the principles on pay and compensation in significant financial institutions developed by the FSF to ensure compensation structures are consistent with firms’ long-term goals and prudent risk taking.

2009 Remuneration Forum for investors, directors and executives rich in content and quality of discussion

The 2009 Remuneration Forum for investors, directors and executives was regarded as the best yet in terms of richness of content and quality of discussion.

The Forum was sponsored by Guerdon Associates with CGI Glass Lewis, and hosted by Allens Arthur Robinson. Attendees included many of the country’s business leaders from the investment and corporate community. In addition, for the first time, Australia’s corporate and financial regulators attended as presenters, and their presence was welcome, adding a necessary and important element to the event.

Guerdon Associates makes submission to the Treasury review of taxation

We attempt to do our bit to fix the unintended consequences of regulation.

The review is chaired by Dr. Ken Henry, head of the Australian Treasury.

While there are numerous areas of concern to us in ensuring that the country’s tax system does not discourage executive and board remuneration arrangements that best serve the needs of shareholders, we decided to focus the paper on resolving the unintended consequences of taxing all unvested employee equity at termination.

CEO share ownership – this economy hurts!

Recently there has been more than usual criticism of executive pay.

The main issue is the apparent disconnect between company performance and executive bonuses. Media, political, and investor sensitivities have been increased by evidence of major abuses in the US system of executive compensation, and respected international bodies’ assessments that banker pay contributed to the world’s economic problems.

Unfortunately, Australian executive pay has been tarred with the same global brush, and with much reporting comprised of sweeping and unsubstantiated statements. While we think a few instances of criticism are justified, many references to specific companies are the result of the fact that the current available remuneration information for most companies reflects the good economic times that existed for most of the year ended 30 June 2008, when company performance was good and bonus payments were high and share prices were still at comfortable levels. The remuneration outcomes for the year ended 30 June 2009 will tell the story – we expect incentive pay will be sharply reduced in many companies, and results to date support this.

But throughout the debate, there is little understanding of the impact that the share market losses have on executive wealth.

The Europeans agree with the Brits on a remuneration code – the world is converging fast on executive pay regulation

The Committee of European Banking Supervisors (CEBS) published its draft principles on remuneration policy on Friday 6 March 2009.

This is the latest in regulator reports that converge on applying the same remuneration principles globally. And to make sure they do this, it has already been agreed by the 26 members of the Financial Stability Forum in March that the Basel Committee on Banking Supervision will be the global enforcer, according to Lord Turner, chairman of the UK’s FSA.

Latest GuerdonData® Updates

Updates to GuerdonData® include disclosures from the following 46 companies:

AUSENCO, ALBIDON LIMITED. ARISTOCRAT LEISURE LTD. AUSTRALAND PROPERTY GROUP, AMP LTD, APN NEWS & MEDIA LTD, ARAFURA RESOURCES LTD, ALUMINA LTD, AXA ASIA PACIFIC HOLDINGS LTD, BENDIGO MINING LIMITED, CITADEL RESOURCE GROUP LIMITED, COOPER ENERGY NL, CALTEX AUSTRALIA LTD, CORPORATE EXPRESS AUSTRALIA, ENERGY ONE LIMITED, ENERGY RESOURCES OF AUSTRALIA, EXTRACT RESOURCES LTD, FLINDERS MINES LIMITED, GRD LIMITED, INTEGRA MINING LIMITED, ILUKA RESOURCES LTD, IMF (AUSTRALIA) LTD, INVOCARE LTD, LIHIR GOLD LTD, MINEMAKERS LIMITED, MEO AUSTRALIA LIMITED, MELBOURNE IT LTD, MINARA RESOURCES LTD, MERMAID MARINE AUSTRALIA LTD, THE MAC SERVICES GROUP, NIDO PETROLEUM LIMITED, NEPTUNE MARINE SERVICES LIMITED, NOMAD BUILDING SOLUTIONS LIMITED, OILEX LTD, PANAUST LTD, PAN PACIFIC PETROLEUM NL, PERSEUS MINING LIMITED, RIO TINTO LTD, RAMELIUS RESOURCES LIMITED, STW COMMUNICATIONS GROUP LTD, SPARK INFRASTRUCTURE TRUST, STRAITS RESOURCES LTD, SANTOS LTD, TAP OIL LIMITED, VDM GROUP, WESTFIELD 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

“Tax breaks give bosses a first class ride”, The Sunday Telegraph, 08 March 2009

“Morphet is not 'worst boss', but she could learn a few things”, James Kirby, The Age, 15 March 2009

“Big chill: major companies freeze pay to save jobs”, Sally Patton and Annabel Hepworth, The Australian Financial Review, 16 March 2009, p. 1 and p.6

“Fat cats with thin returns”, John M Green, Business Spectator, 18 March 2009

“Conflict looms on salary edicts”, Geoff Winestock, Australian Financial Review, 20 March 2009, p. 6

“’Stop the rorts’ ruling on executive pay not the answer”, Michael Robinson, Australian Financial Review, 20 March 2009, p. 63

“Handshake crackdown could make hiring harder”, Richard Gluyas and Teresa Ooi, The Australian, 20 March 2009

“Canberra to limit incentives for termination pay”, Ben Potter, Australian Financial Review, 23 March 2009, p. 9

“Options pain: executives drop billions in shares slump”, Katja Buhrer, Annabel Hepworth and Brett Glegg, Australian

“Tax rejig urged for share incentive plans”, John Kehoe, Australian Financial Review, 31 March 2009, p. 10

“Macquarie shakes up executive pay”, Katja Buhrer and Jo Clarke, Australian Financial Review, 1 April 2009, p. 1 and 54

“More companies take a hard look at incentives”, Matthew Drummond and Patrick Durkin, Australian Financial Review, 1 April 2009, p. 55