GuerdonNews® Volume 10 Number 2

March 2014

Dear [FIRSTNAME],

Welcome to the March 2014 issue of GuerdonNews®

In this first month of Autumn issue we:

• Approve of new engagement guidelines released by the Governance Institute of Australia that require institutional investors to lift their game on disclosure
• Trust that the government can respond to the unanimous, and occasionally furious, agreement on the employee share scheme rule changes needed to encourage start-ups
• Take stock of the effectiveness and flaws of the two strikes law as we count the remuneration report “no” votes
• Note that our company director and investor Forum makes room for the next big issue that could overtake remuneration

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.

New engagement guidelines from Governance Institute of Australia

The guidelines outline practical improvements in disclosure, including that institutional investors disclose on their websites who has voting power over what issues.

"The Guidelines: Improving engagement between ASX-listed entities and their institutional investors" are intended to provide a best practice code that establishes clearer lines of communication, promotes greater transparency in governance-related decision-making and sets a course for a more productive relationship between the two groups.

One current obstacle to positive engagement is the complexity of the institutional investor chain, made up of super funds, fund managers and proxy advisers, which can make it difficult for companies to know who makes the real voting decisions and what factors they consider. The guidelines address this.

Employee share schemes for start-ups – the answers are in, and unanimous

There are a several common themes to submissions made to the Australian Treasury's invitation to comment on improving employee share schemes (ESS) in start-up companies.

The two key ones (that would fix a number of specific problems) are that:

−Income tax should only apply when an employee can realise a reward from their ESS benefit – when options are exercised and/or shares sold, rather than when shares vest or options become exercisable

−The rules need to be simple and encourage the low cost establishment of ESSs

But there is also an opportunity noted in Guerdon Associates' submission to go further by providing Australian companies with an opportunity to better respond to economic volatility.

Two strikes law on remuneration report voting – a three-year stock-take

Effective but flawed and abused

Three years on, and it is timely to stop and take stock of the effectiveness of the controversial ‘two-strikes’ rule.

Seventeen of the 18 companies that recorded a second strike in 2013 were outside the ASX 300. The fact that institutional investor concerns with remuneration matters generally do not extend below the ASX 300 reduces the chances remuneration will be the major issue in these smaller companies, while the potential for a substantial shareholder to ‘misuse’ the two-strikes rule as a power play is also dramatically increased.

Annual Remuneration and Governance Forum program available, invitations sent, and Sydney registrations almost full

The annual board director, institutional investor, regulator and management Remuneration and Governance Forum will be held in Sydney next Tuesday 11 March, and in Perth on Monday 17 March.

Speakers and panellists include prominent non-executive directors, institutional investors and industry bodies such as the Australian Council of Superannuation Investors (“ACSI”).

Availability is limited, so if you have received an invitation we suggest you register now.

To read a summary of the programs click on "More Info" below.

Latest GuerdonData® Updates

Updates to GuerdonData® include disclosures from the following 18 companies:

AUSENCO LIMITED, BOART LONGYEAR LIMITED, CALTEX AUSTRALIA LIMITED, G8 EDUCATION LIMITED, INTREPID MINES LIMITED, INVOCARE LIMITED, MINERAL DEPOSITS LIMITED, OIL SEARCH LIMITED, OZ Minerals Limited, PAN AUSTRALIAN RESOURCES LIMITED, QBE INSURANCE GROUP LIMITED, ROC OIL COMPANY LIMITED, SPARK INFRASTRUCTURE GROUP , SANTOS LIMITED, SYDNEY AIRPORT,, WESTFIELD GROUP, WOODSIDE PETROLEUM LIMITED, and Westfield Retail Trust

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 bay for more blood after David Jones debacle”, Patrick Durkin, Australian Financial Review, 17 February 2014, p. 3

“A busy year ahead for nomination and remuneration committees”, The Boardroom Report, Volume 12 Issue 3 2014

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 © 2014 Guerdon Associates

ISSN 1834-8300

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