Welcome to the May 2009 issue of GuerdonNews®

In this issue:

• We let you in on a forum that may reveal the Australian Productivity Commission’s early thinking, while lamenting the likely absence or incompleteness of submissions from key stakeholders;
• Worry how listed companies can hope to source qualified directors given the increase in workloads that additional regulation will create;
• Summarise the Australian Shareholders’ Association’s new executive pay requirements;
• Reveal that the European Commission may have pre-empted the Productivity Commission with its recommendations on executive pay to its member states; and
• Outline the final version of the Community of European Banking Supervisors (CEBS) remuneration principles, in advance of the principles to be issued by APRA this week.

For those expecting the Remuneration Forum Communiqué in this newsletter we apologise – the need to ensure Forum participants have input has delayed preparation of the Communiqué.

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.

Productivity Commission investigation into executive pay

The Productivity Commission has been asked to undertake a public inquiry into the regulatory framework around remuneration of directors and executives of companies regulated under the Corporations Act.

The Commission has an enormous task in investigating executive pay.

Unfortunately, while it is likely to receive thousands of submissions, it may receive too few from some key stakeholders.

Investors should be worried - sourcing qualified board directors is the next big challenge, as a part-time duty fast becomes a full-time commitment

Non executive directors may become a thing of the past.

The workload is building up so that at some time in the near future a part-time job will become full-time, and so effectively “executive”.

Hector Sants, chief executive of the UK’s Financial Services Authority (FSA), has elaborated further on the standards he expects from key participants in the governance of FSA regulated firms. In a speech delivered on 12 March 2009, Mr Sants considered the role of non-executive directors. He stated:

“The greater engagement of shareholders and non-executives will be central to this improved regulatory proposition…..Non-executives will need to commit more time and raise their technical skills to exercise rigorous oversight. These changes will no doubt warrant more support and indeed compensation for these individuals. They will also however, need to be more willing to challenge executives. All of this suggests that non-executive directors, as others have already observed, will need to become more like full-time 'Independent Directors'.”

ASA position and guidelines on executive remuneration

The ASA released its updated policy statement on executive remuneration ‘for the guidance of listed companies’ on 23 March 2009.

The Australian Shareholders’ Association (ASA) represents retail shareholders. As such, it can be a significant force in directing proxies on behalf of its members for companies with a large retail shareholder base.

The ASA is concerned about:

• The rate at which executive remuneration has increased in the last 10 years;
• The gap between remuneration for senior executives and other employees;
• Whether Australian executive remuneration really needs to meet US and UK standards;
• Large termination payments;
• High levels of short-term incentive payments and the potential for these to encourage executives to adopt a short-term rather than a longer-term focus.

European Commission setting a precedent for Australia’s Productivity Commission?

In conjunction with a separate recommendation on banker pay, the European Commission (EC) has also finalised a recommendation for “director” pay.

The recommendation is not a law. It is a recommendation to member states to harmonise frameworks across the European Union.

Nevertheless, in light of Australia’s Productivity Commission work, it is worth noting where the Europeans are heading.

CEBS publishes its principles on remuneration

The Committee of European Banking Supervisors (CEBS) published a finalised set of principles for remuneration policies on 20 April 2009, following a one-month public consultation period and a public hearing.

The principles vary from the draft principles, with improvements on many of the issues we identified in that article.

The CEBS principles cover remuneration policies applying throughout a financial institution rather than focusing exclusively on executive pay or severance pay. They focus on key aspects of remuneration policies, and in particular:

- alignment of institutional and individual objectives;
- transparency to internal and external stakeholders;
- governance with respect to oversight and decision-making;
- performance measurement; and
- forms of remuneration.

Latest GuerdonData® Updates

Updates to GuerdonData® include disclosures from the following 9 companies:

ADELAIDE BRIGHTON LIMITED, AUSTAR UNITED COMMUNICATIONS LIMITED, BOART LONGYEAR LIMITED, COCA-COLA AMATIL LIMITED. OIL SEARCH LIMITED, ROC OIL COMPANY LIMITED, SIGMA PHARMACEUTICALS LIMITED, SINO GOLD MINING LIMITED, and MACQUARIE GROUP 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

“Cutting through the issues”, Domini Stuart, Company Director, Vol 25 No 03 April 09, pp. 25-27

“Executive remuneration”, Jennie Brockie (moderator), Insight, SBS broadcast, 7 April 2009 http://news.sbs.com.au/insight/episode/index/id/60#watchonline

“Companies try alternatives to laying off staff”, Marsha Jacobs, Australian Financial Review, 8 April 2009, p. 5