Welcome to the February 2012 issue of GuerdonNews®
Another year of challenge for the board remuneration committee
In this issue we:
• Start off the year with our predictions for director and executive pay for the year ahead
• Note that NED pay levels have increased, and that the rate of increase has accelerated from prior
• Invite you to the Remuneration Forum to review outcomes from the 2 strikes law, and review director and investor engagement successes
• Summarise the draft government legislative changes impacting director liability, as far as they go
• Duck for cover as the UK proposes binding executive pay votes
• Predict that the government will require director and executive pay disclosure in the Not-For-Profit sector
• Note that CAMAC’s review of derivative definitions does not make the task of ensuring pay is aligned with performance any easier
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 since our last newsletter.
The outlook for director and executive pay in 2012
This article takes dusts off our crystal ball, and presents our outlook for non-executive director and executive pay for 2012.
We have a few tips on what needs to be done to facilitate achievement of shareholder requirements and expectations in a tough environment where earnings growth will remain hard to come by.
Fee increases return for Non-Executive Directors (NEDs)
The median change in total compensation for all NEDs (both chairmen and directors) in 2011 was 5%.
This was significantly higher than the 0.3% in 2010, but lower than the 7% median change in CEO total pay for 2011.
The energy and utilities sector directors (excluding chairmen) received the highest median total compensation changes at 10.4% and 11.0% respectively. The health care sector was the least likely to increase fees and awarded the smallest increases.
The Honourable David Bradbury, MP, to discuss government’s remuneration regulations at Remuneration Forum
Invitations go out this week
David Bradbury, Treasury Secretary responsible for taxation and corporate law, among other things, has agreed to discuss the government’s approach to remuneration regulation at this year’s Remuneration Forum.
This year’s Forum is on the afternoon of Monday 5 March.
Sponsored by Guerdon Associates with proxy adviser CGI Glass Lewis, it will be hosted at Arthur Allens Robinson’s Sydney premises.
If you are an institutional investor, company director, in executive management, or a regulator, you should receive an invitation later this week (sorry, no media permitted at this event). The Chatham House Rule applies.
Call us if you do not receive this invitation, or want to reserve a place.
Limited action so far on director liability provisions
The Australian government has released an exposure draft (ED) of the proposed Personal Liability for Corporate Fault Reform Bill 2012.
Derivative liability provisions impose criminal liability in situations where directors may not be aware of, or have the ability to prevent, the commission of an offence by the company. They also often require directors to prove their innocence, which is a reverse of the usual situation under the criminal law.
The UK government’s executive pay law proposals – going further than the Australian laws
The measures won widespread praise from both business and unions. Interestingly, investor groups had more mixed reactions.
Predictably, the criticism of Australian executive remuneration in the media and from the broader public has not gone away as a result of recent Australian laws, which suggests there may still be votes to be won for further “action” on executive pay.
Given the UK proposals for a binding shareholder vote and employee consultation go that step further, it would be instructive for all Australian stakeholders to be aware of what could happen next.
CAMAC report on derivatives does not make it easier to pay for performance
Most would agree that it is better from a governance perspective to vest performance pay at the end of the performance period, when pay can be properly assessed.
This becomes problematic when executives retire. You would want departing executives to do the right thing by their successor, and leave things in good shape. You would not want them just to focus on maximising their last bonus and to run the business into the ground in the process. But unintended consequences of legislation and regulation make it difficult to align pay and performance.
New governance regime for not-for-profits – disclosure of remuneration on the way?
The Australian government is reviewing governance arrangements in the NFP sector, with a view to replacing the current duplicative, burdensome and unclear governance structure with a new centralised governance framework.
In relation to remuneration, the consultation paper notes that the remuneration of management and board members can be a contentious issue for NFPs, particularly in attracting and retaining staff.
Latest GuerdonData® Updates
Updates to GuerdonData® include disclosures from the following 27 companies:
ALE PROPERTY GROUP, THAKRAL HOLDINGS GROUP, Growthpoint Properties Australia, United Overseas Australia Limited, Austbrokers Holdings Limited, BT Investment Management Limited, Count Financial Ltd, SFG Australia Limited, SERVCORP LIMITED, AUSTRALIAN AGRICULTURAL CO, Argentina Mining Ltd, Altius Mining Ltd, Antipa Minerals Ltd, Bligh Resources Ltd, Bulletin Resources Ltd, Centius Gold Ltd, GGG Resources PLC, Indochine Mining Ltd, Middle Island Resources Ltd, Octagonal Resources Ltd, Paynes Find Gold Ltd, Phoenix Gold Ltd, Riedel Resources Ltd, Red Mountain Mining Ltd, Thomson Resources Ltd, Timpetra Resources Ltd, and Navaho Gold Ltd
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
“Hidden hurdles decide top bankers’ pay”, John Kehoe, Australian Financial Review, 8 December 2011, p. 41
“Call to pay back hidden dividends”, Michael West, Sydney Morning Herald, 13 December 2011
“Hidden pay condemned”, Michael West, Sydney Morning Herald, 13 December 2011