GuerdonNews® Volume 8 Number 3

April 2012

Dear [FIRSTNAME],

Welcome to the April 2012 issue of GuerdonNews®

In this issue we:

• Express concern that a simple drafting amendment to address a serious flaw in the 2 strikes law on remuneration voting may not be resolved for the next proxy season
• Describe a case whereby an equity plan with a private ruling was later found to be non-complying by the Australian Tax Office
• Compare UK and US methods of clawback (in the broader sense of the term), with implications for how Australia may legislate later this year
• Review the significant governance changes voluntarily taken on by Australian retail superannuation funds
• Summarise the points made at the 6th annual Remuneration Forum for directors, management, and institutional investors
• Describe how the UK government is proposing to put executive remuneration to a binding vote
• Confirm the change of address for our Sydney office

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.

Shareholders’ proxies may be disregarded again this proxy season

Drafting errors mean regular shareholders who lodge undirected proxies with the board chairman do not have their remuneration report votes counted.

The government’s belated attempts to address the situation failed to get through parliament in time for the most recent proxy season.

Well, the 30 June 2012 financial year company proxy season is not looking good either.

Australian Tax Office wins in employee share scheme case

It pays to keep things simple

Most large ASX listed companies have employee equity plans that utilize tried and tested tax deferral or tax-exempt features enshrined in part 83A of the Income Tax Assessment Act. However, some smaller ASX listed and private companies have been lured into adopting more complex and purportedly more tax effective employee equity plans based on private tax rulings.

A recent case has highlighted pitfalls with this approach, and emphasizes that when it comes to employee share plan design, simplicity is usually the best approach.

Clawback – a comparison of alternative approaches

Legislating on the basis of financial misstatement may not be particularly effective

The Australian government has indicated that it will legislate to require clawback of executive remuneration for financial misstatements. In addition to the fact that financial misstatement is an undefined term in Australian corporate law, many other difficulties abound.

This article compares and contrasts recent “clawbacks” of executive remuneration in the UK with statutory remedies available under United States securities laws.

Changes for superannuation funds on remuneration disclosure and trustee independence

Retail funds leading industry funds on governance

The Australian Financial Services Council (FSC) represents and sets the governance standards for its member companies from the retail and corporate superannuation sectors (not industry funds). On 6 March 2012 the FSC released its policy on superannuation governance.

The policy raises the governance standards bar not only on the likely APRA regulation.

The policy will form the basis for new mandatory standards on superannuation governance for the FSC’s member companies.

Remuneration Forum 2012

Understanding the rules of engagement

The 6th annual Remuneration Forum, sponsored by Guerdon Associates and proxy adviser CGI Glass Lewis, was held in Sydney on 5 March 2012. Once again it brought together participants from all sides of the executive remuneration debate – including directors, institutional investors, and management.

The focus this year was on assessing the impact of the two-strikes rule, after its first AGM season, and on improving methods of engagement between investors and companies.

This article summarises the discussion.

A binding vote on executive pay

How the UK proposes to do it

Controlling executive pay has proved to be a populist issue that is a relatively easy political “win” with voters. This is why developments in one country need to be carefully monitored for the likelihood that they may be adopted by other countries, including Australia.

The UK Secretary of State for Business has now published a consultation paper that provides more details on a new model for shareholder voting.

It's done (and dusted too)

Guerdon Associates’ Sydney office has moved

Our Sydney office has relocated - same building, but a higher floor.

The main telephone number, and staff extensions, remain unchanged, as does the fax number.

Click below to see our office locations and contact numbers.

Latest GuerdonData® Updates

Updates to GuerdonData® include disclosures from the following 37 companies:

TAP OIL LIMITED, ENERGY RESOURCES OF AUSTRALIA LIMITED, NORTHERN IRON LIMITED,AUSTRALAND PROPERTY GROUP, GREENLAND MINERALS AND ENERGY LIMITED, INDOPHIL RESOURCES NL, IVANHOE AUSTRALIA LIMITED, METMINCO LIMITED, ABM RESOURCES NL, AZIMUTH RESOURCES LTD, BURU ENERGY LIMITED, CARABELLA RESOURCES LTD, DRILLSEARCH ENERGY LTD, GOLD ROAD RESOURCES LTD, HILLGROVE RESOURCES LIMITED, MICLYN EXPRESS OFFSHORE PTE LTD, NEXTDC LTD, NEON ENERGY LTD, NOBLE MINERAL RESOURCES LIMITED, NORTHERN STAR RESOURCES LTD, OROTON GROUP LIMITED, PAPILLON RESOURCES LIMITED, RED 5 LTD, SENEX ENERGY LIMITED, TANAMI GOLD NL, APN NEWS & MEDIA LIMITED, HENDERSON GROUP PLC, ILUKA RESOURCES LIMITED, AMP LIMITED, AURORA OIL & GAS LIMITED, WESTFIELD GROUP, ARISTOCRAT LEISURE LIMITED, ALUMINA LIMITED, PERILYA LIMITED, PHOSPHAGENICS LTD, TEXON PETROLEUM LTD, and WEBJET 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

“Should private companies ever disclose their executives' pay?”, Miriam Robin, Smart Company, 14 March 2012

“Super shifts to frontline of tax row as business calls for wage trade-offs”, Annabel Hepworth and Michael Franklin,
The Australian, March 21, 2012

Disclaimer

The information, analysis and opinion in this e-mail and attachments are intended to be for informational purposes only. Analyses are based on information taken from public documents or private surveys, and we do not represent to its accuracy. Guerdon Associates assumes no liability for the use or interpretation of information contained herein. This publication is provided 'as is' without warranty of any kind, either expressed or implied, including, but not limited to, the implied warranties of marketability, fitness for a particular purpose, or non-infringement of third party rights.

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  Copyright © 2012 Guerdon Associates

ISSN 1834-8300

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