Welcome to the October 2011 issue of GuerdonNews®

In this issue we:

This month we:

• Are aware that some companies will have AGM problems given that the legislation to correct the flawed "2 strikes” law has been referred to parliamentary committees
• Provide a checklist for companies in the slow lane of the economy grappling with appropriate executive performance requirements
• Wonder if APRA’s new superannuation trustee and executive pay disclosure standards will result in an escalation of pay
• Consider if Australia is lucky to have the 2 strikes law given what is being suggested in the UK
• Note that institutional investors are being urged to be more assertive
• Advise that APRA is consolidating remuneration governance regulations across all regulated entities

We conclude with Guerdon Associates in the news media and the latest on executive and director remuneration disclosure updates available on the GuerdonData® on-line database.

Flaw in 2 strikes law still “in process of being amended”

Do not hold your breath – it has been referred to not one, but two parliamentary committees!

Recently, the Australian Corporations Act was amended to place voting restrictions on key management personnel and their closely related parties in relation to remuneration-related matters at general meetings, including the remuneration report resolution.

Unfortunately, the Bill as passed by Australia’s parliament has drafting flaws.

The good news is that the draft legislation correcting these flaws has been tabled in parliament.

But there is not so good news.

Reviewing incentive targets for companies in the slow lane

We provide a checklist

As more uncertainties about the economic outlook for 2012 emerge for those in the slow lane of the 2-speed economy, many companies appear to be edging towards “softer” performance targets in pay plans.

We expect there will be several cases where the bonus opportunities for executives will remain unchanged (or in some cases will be increased), but potential rewards for shareholders, measured by dividends paid and share prices, may reduce. Investors may question whether this represents a proper alignment of interests.

In this article we suggest a remuneration committee checklist for determining the most appropriate action.

APRA considering new superannuation fund standards that include remuneration governance

Will disclosure escalate superannuation trustee and executive pay?

On 28 September 2011, the Australian Prudential Regulation Authority (APRA) released its proposed new superannuation prudential standards for consultation.

The prudential standards for the superannuation industry will be similar to those already applying to other APRA-regulated industries, covering governance, fit and proper persons, risk management, business continuity management, outsourcing and audit and related matters.

Superannuation-specific standards will cover conflicts of interest, investment governance, insurance in superannuation, defined benefit funding and solvency, and operational risk financial requirements.

And they also suggest disclosure of trustee and executive pay.

What could be worse than the 2 strikes law as it is configured in Australia?

The UK is considering a binding vote on executive pay

With Australian companies scurrying to comply with major new requirements imposed by the two-strikes law and other pay-related taxation and termination payments changes, boards may consider that the major governance initiatives are complete.

This is not so. The government is yet to respond to the CAMAC review of executive pay disclosures.

Importantly, there is always the prospect that the government picks up on ideas formulated elsewhere as the global push to improve governance of executive pay grinds on.

Consider what is being suggested in the UK.

Call on institutional investors to act

And confront “powerful present realities” and live up to their fiduciary duties of protecting the “savings and dreams” of their trust beneficiaries.

The International Corporate Governance Network (ICGN) is the global body representing governance practitioners. Many of Australia’s large institutional investors were present at this year’s annual conference, held in Paris on 12 to 14 September.

Among those addressing the main forum was Bob Monks.

Monks asserted that the financial crisis has called free-market capitalism itself into question, and institutional investors are enduring criticism for “enabling the crisis through passive corporate governance”.

APRA releases consolidated prudential standards that regulate remuneration

The consolidated standards recognise that, on behavioural matters, the risks facing regulated institutions in each of these industries are very similar.

On 12 September 2011, the Australian Prudential Regulation Authority (APRA) released in final form four prudential standards — on governance, fitness and propriety, outsourcing and business continuity management — that will consolidate and replace 12 existing standards across the authorised deposit-taking (ADI), general insurance and life insurance industries. 



These standards include the standards that regulate remuneration. Known as CPS 510, it will replace APS 510 (for ADIs), GPS 510 (for general insurers) and LPS 510 (for life insurers).

Latest GuerdonData® Updates

Updates to GuerdonData® include disclosures from the following 73 companies:

BILLABONG INTERNATIONAL LIMITED, ENVESTRA LIMITED, EASTERN STAR GAS LIMITED , EXTRACT RESOURCES LTD, FLIGHT CENTRE LIMITED, FLEETWOOD CORPORATION LIMITED, HILLS INDUSTRIES, LIMITED, Karoon Gas Australia Limited, LINC ENERGY LTD , NRW Holdings Limited, PRIMARY HEALTH CARE LIMITED, QANTAS AIRWAYS LIMITED, TELECOM CORPORATION OF NEW ZEALAND LIMITED, WOOLWORTHS LIMITED, CATALPA RESOURCES LIMITED, WHITE ENERGY COMPANY LIMITED, MEO AUSTRALIA LIMITED, ARDENT LEISURE GROUP , AGL ENERGY LIMITED, AMCOR LIMITED, ANSELL LIMITED, AQUILA RESOURCES LIMITED, ARB CORPORATION LIMITED, ARAFURA RESOURCES LIMITED, MESOBLAST LIMITED, REX MINERALS LIMITED, FAIRFAX MEDIA LIMITED, GINDALBIE METALS LTD , GUD HOLDINGS LIMITED, INDUSTREA LIMITED , INTEGRA MINING LIMITED, IINET LIMITED, CROWN LIMITED, MOLOPO AUSTRALIA LIMITED, NEWCREST MINING LIMITED, BRAMBLES INDUSTRIES LIMITED, CREDIT CORP GROUP LIMITED , CENTRO RETAIL GROUP, PACIFIC BRANDS LIMITED, PALADIN RESOURCES LIMITED, PLATINUM AUSTRALIA LIMITED , MERMAID MARINE AUSTRALIA LIMITED, RAMSAY HEALTH CARE LIMITED, RESOLUTE MINING LIMITED, KINGSROSE MINING LIMITED, Seven West Media Limited, McMillan Shakespeare Limited, ADAMUS RESOURCES LIMITED, COALSPUR MINES LIMITED, SKILLED GROUP LIMITED, SUPER CHEAP AUTO GROUP LIMITED, TABCORP HOLDINGS LIMITED, COCHLEAR LIMITED, COMPUTERSHARE LIMITED, SEVEN GROUP HOLDINGS LIMITED, MINCOR RESOURCES NL, MINERAL DEPOSITS LIMITED, CLOUGH LIMITED, CARBON ENERGY LIMITED , BOW ENERGY LIMITED , CONNECTEAST GROUP, GLOUCESTER COAL LTD, LEIGHTON HOLDINGS LIMITED, Platinum Asset Management Limited, PHARMAXIS LTD, SONIC HEALTHCARE LIMITED, TOX FREE SOLUTIONS LIMITED, VIRGIN BLUE HOLDINGS LIMITED , BIOTA HOLDINGS LIMITED, CAPE LAMBERT IRON ORE LTD , GOODMAN GROUP, HARVEY NORMAN HOLDINGS LIMITED, and INDEPENDENCE GROUP NL

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

“Investors take aim at Alesco”, Patrick Durkin, Australian Financial Review, 19 September 2011, p.3