Welcome to the February 2013 issue of GuerdonNews®

In this first of our monthly issues in 2013 we:

• Look at the significant executive pay issues likely to be faced by board remuneration committees in 2013
• Review non-executive director remuneration trends
• Advise that The Hon Mr Bernie Ripoll will be at the director and investor Remuneration Forums to discuss new government legislation
• Summarise the remuneration related requirements of APRA prudential standards for superannuation funds
• Note the UK government’s response to the executive pay suggestions within the Kay review of equity markets
• Applaud signs of progress on director liability reform

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.

The outlook for Australian director and executive pay in 2013

This article dusts off our crystal ball, and presents our outlook for executive pay in 2013.

The Australian resources investment boom has peaked, and is no longer underpinning economic growth. This means the near term outlook for many industries will be impacted by the need for structural adjustment. Revenue growth for most of 2013 from domestic consumption, or business investment, will be absent. The focus will remain on cost control, productivity and operational efficiency, and the incentives plans that support this focus.

Meanwhile, there is more government regulation to deal with.

Median non-executive director fees increase 3.8%

Highest in the telco and energy sectors

The median change in total remuneration for NEDs in 2012 was lower than both the 5.1% median NED fee change in 2011 and the 7.7% median change in CEO total pay for 2012.

However, there were variations by industry.

Bernie Ripoll to be at director and institutional investor Remuneration Forum

Invitations were sent last week for the Forums in Melbourne and Perth.

We are pleased to advise that The Hon. Mr. Bernie Ripoll, MP, Parliamentary Secretary to the Treasurer, responsible for the development and implementation of policies in relation to corporate governance and financial literacy, will address the Forums on the Government’s proposed executive pay legislation, with a particular focus on clawback and the response to CAMAC's recommendations regarding executive remuneration. He will take questions.

The Forums will include panel discussions with ample time for Q&A. As usual, and to facilitate frank and open debate, the Chatham House Rule will apply. No news media will be permitted to attend.

Final APRA superannuation industry prudential standards

These impact executive and trustee remuneration

Following the publication of APRA’s final prudential standards for the superannuation industry on 15 November 2012, the first 10 draft superannuation industry prudential practice guides were released for consultation on 11 December 2012, together with an accompanying discussion paper.

Director criminal liability reforms provide some good news

Legislation imposing personal criminal liability on directors is being reviewed.

The 23 July 2012 meeting of the Council of Australian Governments (COAG) agreed to principles and guidelines for the imposition of personal criminal liability on directors and other officers as a consequence of corporate offences. All future legislation is to comply with the principles, and the states and territories are to review their existing director liability provisions. If necessary, the existing provisions will be repealed or amended to bring them into line with the COAG principles.

UK government response to Kay Review on remuneration matters

On 22 November 2012, the UK government presented its detailed response to the recommendations made by Professor John Kay in his final (July 2012) report on his review into the problems of short-termism in UK equity markets

Professor Kay’s analysis focused primarily on the nature of the relationships that arise between market participants, and the incentives they face. He characterized the underlying causes of these problems as the decline of trust and the presence of misaligned incentives in these relationships, without attaching blame to particular groups in the investment chain.

Among the solutions was a way to pay executives for a longer term focus.

Latest GuerdonData® Updates

Updates to GuerdonData® include disclosures from the following company:

AUSTRALIAN AGRICULTURAL COMPANY 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

“API’s revised pay policies approved”, Jake Mitchell, Australian Financial Review, 23 January 2013, p. 13

“Executive pay laws in for a further shake-up”, The Boardroom Report, January 2013, p. 1