Welcome to GuerdonNews®

In this April 2014 issue we:

• Summarise clawback, director tenure and other significant changes in the third edition of the ASX Corporate Governance Council Principles and Recommendations
• Note that proxy adviser ISS has been acquired (for a change) by a company not itself subject to proxy advice
• Present highlights from the well received Sydney and Perth Governance and Remuneration Forums for investors and directors
• Suggest that there is no need for panic regarding a draft ATO tax ruling on employee remuneration trusts
• Provide tips on assessing whether a person is right for your board
• Describe interesting research validating a link between CEO pay and well-governed company performance
• Report how the Federal Court sees taxation of deferred pay post employment

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.

ASX Corporate Governance Council changes to clawback and limited director tenure

Amendments to the draft version are surprisingly extensive

The now-finalised third edition of the ASX Corporate Governance Council Principles and Recommendations published on Thursday 27 March has dropped proposals that:
• Companies have a remuneration ‘clawback’ policy
• Director tenure over 9 years might cause doubts about the independence of a director

In addition, disclosure of a board skills matrix is now required – albeit with some caveats regarding the disclosure of individual director’s skills and commercially sensitive information.

The new 3rd edition of the Principles and Recommendations also includes many “refinements” to the previous remuneration recommendations.

We provide a summary of the more significant changes.

ISS acquired by private equity firm

Management may now have a more free hand to run the business their way

Vestar Capital Partners will acquire Institutional Shareholder Services from MSCI for $364 million, according to a joint statement from the private equity firm and MSCI.

ISS management will join with Vestar in buying the company.

2014 Governance and Remuneration Forums

The highlights of absorbing exchanges between directors and investors

Feedback regarding both the Sydney and Perth Governance and Remuneration Forums has been overwhelmingly positive.

This article summarises what were full and absorbing discussions, albeit with many interesting bits left out because of the Chatham House Rule.

ATO draft tax ruling on use of employee remuneration trusts

Not likely to impact employee share schemes

Concerns have been raised that employer contributions to employee share trusts may not be tax deductible after a recent tax ruling.

Do not panic.

See our article to find out why.

Assessing the right director for your board

Tips on a step to board renewal

A prospective director comes highly recommended by your colleagues. He or she has a track record of success at a well-regarded public company or as a professional in a highly regarded firm and has experience at board level in other listed companies. It seems his/her background, skills and experience perfectly match what you are looking for.

But how will the other directors on your board regard the prospect?
Will he or she be able to understand and accommodate our board culture?
How will he or she behave when there are difficult decisions to be made, or in conflict situations?

This article describes a research validated method with tips on its application for director selection.

CEO remuneration and performance correlated when there is also good governance

Recent research

Does a CEO’s pay accurately reflect his or her ability and how much value does a CEO bring to a company?

Recent research indicates that a leader’s remuneration reflects both a company’s performance and financial market perception of the corporation – as long as the company’s governance is good.

Whie much of the research on pay and performance has many holes, an advantage of this multi-pronged research method is that it leaves little room for alternative explanations.

Federal Court considers tax treatment of deferred pay

This is interesting because of the increasing trend to defer incentive remuneration

The Court held that the payments were deferred compensation as a reward for services rendered. The fact that the termination of employment was an occasion by reference to which the amount became payable did not mean that the payments were made in consequence of the termination of employment.

Latest GuerdonData® Updates

Updates to GuerdonData® include disclosures from the following 17 companies:

RIO TINTO LIMITED, GENERAL PROPERTY TRUST, ADELAIDE BRIGHTON LIMITED, AUSTRALAND PROPERTY GROUP, AMP LIMITED, APN NEWS & MEDIA LIMITED, AURORA OIL & GAS LTD, ALUMINA LIMITED, BEADELL RESOURCES LIMITED, COCA-COLA AMATIL LIMITED, ENERGY RESOURCES OF AUSTRALIA LIMITED, HENDERSON GROUP PLC, ILUKA RESOURCES LIMITED, IRESS MARKET TECHNOLOGY LIMITED, INDOPHIL RESOURCES NL, STW COMMUNICATIONS GROUP LIMITED, and LEIGHTON HOLDINGS 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

“Sighs of relief from DJs shareholders”, Tony Boyd, Australian Financial Review, 12 March 2014, p. 48

“Is the Australian prime minister due for a pay rise?”, Jackson Stiles, The New Daily, 10 March 2014