Welcome to the October 2009 issue of GuerdonNews®

In this issue we:

• Comment on the Productivity Commission’s draft report on the regulation of director and executive remuneration in Australia

• Summarise APRA’s response paper to industry consultation on executive remuneration

• Provide an overview of the draft termination payment regulations released by the Government on 3rd September

• Give an update on the status of new employee share plan tax legislation

• Describe The Conference Board Task Force guiding principles on executive remuneration in the US

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 reports on executive pay

The Productivity Commission released its draft report on its review into the regulation of director and executive remuneration in Australia on 30 September 2009.

The Commission concluded that while there has been rapid growth in executive pay since the 1990s, the evidence does not indicate widespread failure in remuneration setting across Australia’s 2000 listed companies, nor significant adverse impacts on the performance of the corporate sector as a whole. Nevertheless, there is some evidence of executive labour market inefficiency. The Commission’s suggested response is to strengthen corporate governance to improve how boards set remuneration and engage with shareholders, rather than impose prescriptive pay constraints (such as caps or mandated structures), as they would be impractical, weaken the role of boards and could have perverse economic consequences, without necessarily achieving any real pay restraint.

APRA responds to industry consultation on executive remuneration

After releasing its consultation paper on executive remuneration on 28 May 2009, APRA received 51 submissions on the proposals and met with a number of regulated entities and industry groups.

As a result, on 7 September 2009 APRA released a response paper and re-drafted versions of the relevant guidelines and standards. The most important of these for remuneration practitioners is Draft Prudential Practice Guide 511 (PPG 511).

APRA acknowledges that remuneration is only one aspect of risk for financial services companies, and that the remuneration piece should only be pursued as one of the components of risk management.

Executive and director termination payments: final regulations

On 3rd September, the Government released the draft regulations and explanatory material to accompany the proposed legislation relating to the reform of termination payments.

We have described the proposed changes and detailed our concerns in previous articles.

Employee share plan tax update

The government has been pushing ahead with introduction of its new employee share plan tax regime since our most recent GuerdonNews® item on this subject.

On 7 September 2009, the Chairman of the Board of Taxation announced that the Board is inviting submissions addressing the terms of reference for its review into elements of the taxation of employee share schemes.

Some useful executive remuneration guidelines from the US

Australian executive remuneration practice and governance has stood up relatively well in the global financial crisis.

One sign of this is international acknowledgement that APRA’s remuneration guidelines provide a model for the G20 response for the financial services sector. Corporate practices from the US in relation to remuneration have tended to attract criticism. But a set of recommendations and ‘guiding principles’ produced by The Conference Board Task Force on Executive Remuneration in the US recently suggest that a positive wind for change may be blowing.

Latest GuerdonData® Updates

Updates to GuerdonData® include disclosures from the following company:

AGL Energy Limited, Amcor Limited, Ansell Limited, Aquila Resources Limited, Asciano Group, Australian Infrastructure Fund, Australian Pipeline Trust, Babcock & Brown Infrastructure Group, Bendigo Bank Limited, Bendigo Mining Limited, BHP Billiton Limited, Boral Limited, Bradken Limited, Brambles Industries Limited, Clough Ltd, Cochlear Limited, Cockatoo Coal Limited, Commonwealth Bank Of Australia, Computershare Limited, Connecteast Group, Consolidated Media Holdings Limited, Crane Group Limited, Crown Limited, CSL Limited, Deep Yellow Limited, Downer Edi Limited, Eastern Star Gas Limited, Energy Developments Limited, Envestra Limited, Extract Resources Ltd, Fairfax Media Limited, Felix Resources Limited, Flight Centre Limited, Foster's Group Limited, Gud Holdings Limited, GWA International Limited, Healthscope Limited, Henderson Group Plc, HFA Holdings Limited, Hills Industries Limited, Icon Energy Ltd/Australia, Imdex Limited, Independence Group Nl, Indophil Resources Nl, Industrea Limited, Insurance Australia Group Limited, Integra Mining Limited, Intrepid Mines Limited, JB Hi-Fi Limited, Kagara Zinc Limited, Karoon Gas Australia Limited, Leighton Holdings Limited, Lend Lease Primelife Group, Linc Energy Ltd, Macmahon Holdings Limited, Mermaid Marine Australia Limited, Mineral Deposits Limited, Newcrest Mining Limited, Nexus Energy Limited, Origin Energy Limited, Pacific Brands Limited, Paladin Resources Limited, Pan Pacific Petroleum Nl, Paperlinx Limited, Perpetual Limited, Photon Group, PMP Limited, Qantas Airways Limited, Ramsay Health Care Limited, Resolute Mining Limited, Rivercity Motorway Group, Riversdale Mining Limited, SAI Global Limited, Seven Network Limited, Silex Systems Limited, Skilled Group Limited, Sms Management & Technology Limited, Stockland, Suncorp-Metway Limited, Tabcorp Holdings Limited, Tattersall's Limited, Telstra Corporation Limited, The Reject Shop Limited, Toll Holdings Limited, Transfield Services Infrastructure Fund, Transpacific Industries Group Ltd, Transurban Group, United Minerals Corporation Nl, UXC Limited, Valad Property Group, Wesfarmers Limited, Western Areas Nl, Woolworths Limited, Wotif.Com Holdings 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

“Executives face tougher pay scrutiny”, Patrick Durkin, Australian Financial Review, 15 September 2009, p.1

“Good as gold”, Miriam Steffens, The Sydney Morning Herald, 26 September 2009, p. 1

“Lapping it up: fat cats earn more than enough for two lifetimes”, Jessica Irvine, The Sydney Morning Herald, 29 September 2009, p.1

"In a bind over the non-binding vote", Kate Burgess, Australian Financial Review, 1 October 2009, p.61