Welcome to the November 2011 issue of GuerdonNews®

In this issue we:

• Summarise ACSI research on ASX 100 board composition and NED pay
• Note that a Deutsche Bank study indicates that the financial performance of Australian companies is related to the CEO’s share of executive pay
• Advise that banks will need to disclose more on their pay under new APRA regulation
• Find that market systems encourage short term performance, which is not in most stakeholders' interests
• Provide indications that the government is not yet done with executive pay
• Suggest that boards not leave pay clarity one strike too late

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.

Results of ACSI research on ASX 100 board composition and NED pay

ACSI has released its tenth annual research paper on ASX100 boards, reviewing board composition, director independence, gender balance, director remuneration, director tenure and director age profile.

There were 88 boards in the sample, with 598 individuals holding a total of 728 board seats.

CEO share of executive pay as a predictor of company performance

Deutsche Bank has released an analysis that indicates the financial performance of Australian companies can be reasonably predicted from the CEO’s share of executive pay.

The study replicated as closely as possible a US study by Bebchuck and others showing that that the CEO ‘pay slice’ is negatively correlated with accounting profitability and that firms with a high CEO pay slice tend to make worse acquisition decisions and are more likely to make opportunistically timed option grants to their CEOs.

Banks will need to disclose more on their pay under new APRA regulation

It is likely that the pay disclosures of Australia’s banks will soon have to cover not just their top executives and directors (KMP), but also employees considered as material risk takers.

APRA indicated this on Friday 7 October 2011, in a letter to all ADIs. In effect, APRA indicated that it will implement in full the disclosure regime agreed by the international committee of banking supervisors.

Short term performance pay being encouraged by the market at the expense of long term sustainability

A confluence of factors is reinforcing the focus on short-term performance.

The growing emphasis on short-term incentives in executive remuneration is entirely in keeping with the expectations of a significant part of the institutional investment community.

Australian government indicates more regulation on executive pay, and takes a swipe at proxy firms

The Hon David Bradbury MP is Parliamentary Secretary to the Treasurer,

and responsible for the recent two-strikes rule that provides the opportunity for a minority of shareholders to trigger a resolution for a new board election if they do not like executive pay.

Do not leave pay clarity one strike too late

The two strikes law has the potential to seriously disrupt the smooth functioning of listed companies and materially reduce shareholder value because a small minority of shareholders can work havoc.

That is, 25% of votes on the remuneration report that are cast two years running will result in a board spill and election for all non-executive directors. Given that only about 60% of shareholder votes are cast, that means 15% of votes are needed each of 2 years for this to happen.

Latest GuerdonData® Updates

Updates to GuerdonData® include disclosures from the following 77 companies:

ACRUX LIMITED, ALLIED GOLD MINING PLC, AMPELLA MINING LIMITED, AUSTIN ENGINEERING LIMITED, AQUARIUS PLATINUM LIMITED, ASTON RESOURCES LIMITED, BENDIGO BANK LIMITED, BHP BILLITON LIMITED, BORAL LIMITED, BANDANNA ENERGY LIMITED, BANK OF QUEENSLAND LIMITED, BATHURST RESOURCES LIMITED, CABCHARGE AUSTRALIA LIMITED, CASH CONVERTERS INTERNATIONAL , CUDECO LIMITED , CERAMIC FUEL CELLS LIMITED , CHALLENGER FINANCIAL SERVICES GROUP LIMITED, CHARTER HALL GROUP, CENTRO PROPERTIES GROUP, COCKATOO COAL LIMITED, CONQUEST MINING LIMITED , CSG LIMITED, DECMIL GROUP LIMITED, DAVID JONES LIMITED, DART ENERGY LIMITED, ECHO ENTERTAINMENT GROUP LIMITED, EMECO HOLDINGS LIMITED , ELEMENTAL MINERALS LIMITED, FLETCHER BUILDING LIMITED, FORGE GROUP LIMITED, FOSTER'S GROUP LIMITED, FKP PROPERTY GROUP, FORTESCUE METALS GROUP LTD, FOCUS MINERALS LTD, FOCUS MINERALS LTD, FLINDERS MINES LIMITED, GUNNS LIMITED, GRYPHON MINERALS LIMITED, HORIZON OIL LIMITED , IOOF HOLDINGS LIMITED, IMDEX LIMITED, KATHMANDU HOLDINGS LIMITED, KAGARA ZINC LIMITED, LEND LEASE CORPORATION LIMITED, LYNAS CORPORATION LIMITED, MATRIX COMPOSITES & ENGINEERING LIMITED, MOUNT GIBSON IRON LIMITED, MURCHISON METALS LTD , MONADELPHOUS GROUP LIMITED, M2 TELECOMMUNICATIONS GROUP LIMITED, MYER HOLDINGS LIMITED, NUFARM LIMITED, NAVITAS LIMITED, NEXUS ENERGY LIMITED , PREMIER INVESTMENTS LIMITED, PRIMA BIOMED LTD, QR NATIONAL LIMITED, REGIS RESOURCES LIMITED, SARACEN MINERAL HOLDINGS LIMITED, SUNDANCE RESOURCES LIMITED , SANDFIRE RESOURCES NL, SILEX SYSTEMS LIMITED, STARPHARMA HOLDINGS LIMITED, SPOTLESS GROUP LIMITED, STRAITS RESOURCES LIMITED, SAMSON OIL & GAS LIMITED, SOUTH BOULDER MINES LTD, SOUTHERN CROSS MEDIA GROUP LIMITED, THORN GROUP LIMITED, TIGER RESOURCES LIMITED, TPG TELECOM LIMITED, TROY RESOURCES NL, TREASURY WINE ESTATES LIMITED, WESTERN AREAS NL, GREENLAND MINERALS AND ENERGY LIMITED, HUNNU COAL LIMITED, and ALKANE RESOURCES 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

“Moving the executive goalposts”, Guerdon Associates, Business Spectator, 5 October 2011

“Banks’ pay practices in spotlight”, John Kehoe, Australian Financial Review, 13 October 2011, p. 25

“Companies leave pay clarity one strike too late”, Michael Robinson, Australian Financial Review, 14 October 2011, p. 63