Season's greetings, and welcome to the December 2009 issue of GuerdonNews®

In this last newsletter for 2009 we:

• Provide evidence that 2009 CEO pay has responded as it should to the economic downturn

• Summarise key changes to the final APRA pay regulations that came out yesterday

• Provide a checklist for remuneration committees on setting a standard for pay consultant independence

• Are aghast that climate change could impact employee share plan taxation

• Suggest you save the morning of 1 March next year for our investor and non executive director Remuneration Forum

• Highlight Sir David Walker’s recommendations on his review of UK financials’ governance that could impact Australia’s pay regulation deliberations

• Note that capped executive termination pay limits are now law

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.

We look forward to reporting board and executive remuneration news to you again in 2010, with our first monthly issue to be delivered on the first Tuesday in February. Until then, from all of us in Guerdon Associates, best wishes for a safe, happy and prosperous New Year.

Remuneration committee checklist - setting a standard for pay consultant independence

Boards need to plan for the implications of the Australian Productivity Commission‘s executive pay inquiry recommendations and, if appropriate, new APRA regulations, if they have not done so already.

Almost all submissions to the Australian Productivity Commission have supported, to varying degrees, the draft recommendation that board remuneration committees utilise “independent” consultants, and disclose details about the advisers used.

This article considers the factors the board remuneration committee should consider when setting an “independence” standard for their adviser.

The real story on 2009 CEO pay – median increases of 1.5% with large reductions in performance pay

Recent media reports single out individual CEOs who have received large bonus payments or large base salary increases.

But when we look at the overall data, a significant number (43%) of CEOs have suffered a reduction in their total remuneration.

The proportion of CEOs who received an increase in remuneration was 52%, significantly lower than the 2008 proportion of 70%. That is, almost half received no increase, or a decrease in pay.

The proportion of CEOs whose remuneration increased, decreased or stayed the same is shown in the graph below. CEOs who did not receive an STI or LTI in either year are included in the “Stayed the same (zero)” category.

This article looks at the changes to CEO remuneration from 2008 to 2009.

The UK Walker review may be one more input into the Australian Productivity Commission’s final report

This could influence the final formulation of the "two strikes" law

On Thursday 26 November Sir David Walker published his final recommendations on his review of UK banks’ and other financial institutions’ pay and governance.

Some recommendations will impact directly and significantly on Australian banks regulated by the Financial Services Authority for operations in the UK, while another recommendation suggests it be the remuneration committee chairman who fronts up to shareholders for re-election.

Australian Prudential Regulation Authority finalises pay regulations

And they contain pragmatic concessions

Yesterday the Australian Prudential Regulation Authority (APRA) released its final version of prudential requirements on remuneration for authorised deposit‑taking institutions (ADIs) and general and life insurance companies.

The prudential guidelines accompanying the regulations have made significant concessions to pragmatism, while still being hard on factors that could contribute to systemic financial risk.

New capped executive termination pay limits now law

Our November 2009 newsletter reported that the Australian Senate (at the instigation of Senator Xenophon) had amended the government’s proposed changes to the Corporations Act termination payments provisions.

However, on 16 November, the Minister for Financial Services, Superannuation & Corporate Law, Mr Bowen, announced that the Corporations Amendment (Improving Accountability on Termination Payments) Bill 2009 had passed through the Senate after the dropping of the proposed amendment.

Australian employee share scheme tax bill impacted by climate change

Hot air over Canberra

As this article goes to press, consideration of the bill to implement the government’s employee share plan tax changes has been delayed in the Senate by the extended debate on the carbon pollution reduction scheme legislation.

Save the date – 2010 Remuneration Forum

We expect the government to act on the Australian Productivity Commission report on executive pay early in 2010.

In anticipation, we have already lined up an impressive array of speakers and panellists representing institutional investors, non executive directors, regulators and management for our 2010 Remuneration Forum.

Disclosure made simple?

Our submission for a new section 300A to the Productivity Commission

Guerdon Associates has made a joint submission to the Australian Productivity Commission in conjunction with law firm Allens Arthur Robinson, proxy advisory firm CGI Glass Lewis, and investor environmental, social and governance advisory firm Regnan for a replacement to Section 300A of the Corporations Act regarding Key Management Personnel pay disclosure.

Latest GuerdonData® Updates

Updates to GuerdonData® include disclosures from the following company:

AJ Lucas Group Limited, Australia And New Zealand Banking Group Limited, AWB Limited, Bank Of Queensland Limited, Biota Holdings Limited, Citadel Resource Group Limited, Elders Limited, Macarthur Coal Limited, National Australia Bank Limited, Orica Limited, Incitec Pivot, Ten Network Holdings Limited, Westpac Banking Corporation

Guerdon Associates in the News

“Debate rages over 'two strikes' spill move”, Patrick Durkin, Australian Financial Review, 9 November 2009, p. 10

“Holes appear in payout caps”, David Crowe and Patrick Durkin, Australian Financial Review, 17 November 2009, p. 5

“More directors flout trading disclosure rules”, Patrick Durkin and John Kehoe, Australian Financial Review, 18 November 2009, p.3

“Millions to CEOs as value tumbles”, Sunday Tasmanian, 22 November 2009, p. 6

“CEOs' $67m bonuses”, Nick Gardner, Sunday Herald Sun, 29 November 2009, p.38