GuerdonNews® Volume 11 Number 1

February 2015


Welcome to GuerdonNews®

in this first issue of 2015 we:

• Provide an outlook and identify the issues for Australian director and executive pay and board effectiveness for 2015
• Review the extent of 2014 NED remuneration increases
• Summarise the exposure draft of Employee Share Scheme tax amendments
• Demonstrate that revised option valuation tables in the draft Employee Share Scheme tax amendments are an improvement
• Examine research looking at remuneration consultants and CEO pay increases
• Look forward to the Chatham House Rule Forums for investors, directors and management

We conclude with the mentions of Guerdon Associates in the news media and the latest executive and director remuneration disclosure updates available on the GuerdonData® on-line database.

The outlook and issues for Australian director and executive pay and board effectiveness in 2015

We dust off our crystal ball

Conditions have changed, and directors need to be aware of the issues likely to arise based on the factors considered in this article.

Modest fee increases for ASX 300 Non-Executive Directors

About 50% of boards provided an increase

For non-executive directors (NEDs) who received an increase, the median increase was 6.2%. The median increase for non-executive chairmen whose remuneration was increased was 6.8%.

While that may appear high relative to executive increases, keep in mind that boards adjust fees only every other year, on average, rather than annually.

Government releases exposure draft of Employee Share Scheme tax amendments

It is a major improvement

The government has released draft amendments to the rules for the taxation of employee, executive and director share rights and options.

Are the revised valuation tables in the exposure draft of Employee Share Scheme tax amendments better?

They are if you pay tax on options upfront.

This assumes that "better" means a lower taxable value.

The government has released an exposure draft of the revised valuation tables for employee share scheme (ESS) share rights that it is proposing to include in the Regulations to Division 83A. We compare this to the current table and show the difference.

Remuneration consultants and CEO pay increases

Conflicted consultants means higher pay

Recent US research has considered the impact compensation consultants have on CEO pay, using US data for the period 2006 to 2012. This spans the introduction in July 2009 of the requirement for companies that purchase other services from their compensation consultants to disclose fees paid for both compensation consulting and those other services; if the consultants are retained to solely provide advice on pay, fees do not have to be disclosed.

Forums for institutional investors, directors and management

5th of March in Melbourne, and 9th of March in Perth

The program and panellists for these Chatham House Rule Forums on executive and director remuneration and board governance issues are close to finalisation and will be sent out shortly. While the honourable Bruce Billson, the government minister with primary accountability for share scheme taxation, will not be able to attend due to parliament being in session, we will be able to present a valid picture of what the proposed changes mean for employee, director and executive remuneration. In addition, we will review the need for more diverse boards to enter new markets, or respond to external disruption. Lastly, we will get a taste of how new technology will assist in cheaper and more effective capital raisings, among other things.

Invitations have been sent.

Guerdon Associates in the news

“Nine chief’s pay soars to $19.6 million”, James Thomson and Edmund Tadros, Australian Financial Review, 10 December 2014, p. 13

Latest GuerdonData® Updates

Updates to GuerdonData® include disclosures from the following 2 companies:

Aristocrat Leisure Limited and Incitec Pivot 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®.


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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