Director and Executive Remuneration [September]

GuerdonNews® Volume 11 Number 8

September 2015

Dear reader,
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Welcome to the September 2015 issue of GuerdonNews®

In this issue we:

• Ponder if now is the time for some companies to consider options instead of share rights or shares

• Consider the application of ESG ratings by investors and whether boards acquiring ratings is required to respond to the trend

• Describe US requirements for companies to disclose the ratio of CEO to employee pay

• Describe the Australian federal government response to submissions for APRA related superannuation funds to have one-third independent board members

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

For some boards the time may be right to consider options as the vehicle of choice for an executive LTI

Following 1 July taxation changes, some boards are assessing whether or not to include options as a component of their executive and director equity plans. As in all business opportunities, timing is everything. For some companies with reasonable growth prospects, low interest rates and low volatility, the upside of share options may be more than sufficient to cast aside the market infatuation with yield and encourage management to go for growth.

Ratings of investment funds on ESG factors – trend solidifying

In mid August research firm Morningstar said it plans to score mainstream mutual funds and exchange-traded funds on environmental, social and governance (ESG) factors.

Investors are placing increasing importance on ESG policies and practices. Earlier this year, a Morgan Stanley Institute for Sustainable Investing study showed that 71 percent of individual investors are keen on sustainable investing. The number of financial institutions that have signed the UN-supported Principles for Responsible Investment (PRI) has gone up by 29 percent in one year. According to one report, funds with an ESG tag now total $6.2 trillion in total assets under management.

However, ESG ratings quality and reliability vary greatly. And the ratings companies can purchase are not the same ratings that investors use. Boards may want to consider whether ratings should substitute for a company’s own systematic and continuous monitoring of ESG factors and their associated risk.

US now requires disclosure of the CEO to median worker pay ratio

On August 5, 2015, the US Securities and Exchange Commission released its final pay-ratio rule under the Dodd–Frank Act. US companies will be required to disclose the ratio of the median pay of all employees, excluding the CEO, to the total pay of the CEO as disclosed in that year’s summary compensation table.

So far Australia has not considered such a disclosure requirement, although the UK has. The US regulation provides an indication of what such a disclosure requirement would look like.

Outcomes of superannuation governance consultation re director independence

In June, the Australian federal government released exposure draft legislation proposing a new requirement that all superannuation funds must have at least one-third independent directors.

This caused much consternation among Industry superannuation funds whereby power is balanced between non-independent union and employer representatives. In response, the government made several changes to the draft legislation.

Latest GuerdonData® Updates

Updates to GuerdonData® include disclosures from the following 43 companies:

Atlas Iron Limited, Asciano Group, ASX Limited, Brambles Industries Limited, Capitol Health Limited, Commonwealth Bank of Australia, Cardno Limited, Cover-More Group Limited, Downer EDI Limited, Dexus Property Group, Growthpoint Properties Australia, Insurance Australia Group Limited, Infomedia Limited, IMF (Australia) Limited, Magellan Financial Group Limited, Mirvac Group, Nanosonics LImited, RCR Tomlinson Limited, REA Group Limited, Starpharma Holdings Limited, Sirtex Medical Limited, Sirtex Medical Limited, Suncorp Group Limited, Seven West Media Limited, Telstra Corporation Limited, The Reject Shop Limited, Tattersall's Limited, Whitehaven Coal Limited, SMS Management & Technology Limited, Webjet Limited, Austal Limited, Flight Centre Limited, Hills Industries Limited, Hotel Property Investments, McMillan Shakespeare Limited, Mayne Pharma Group Limited, NEXTDC Limited, Paladin Resources Limited, RCG Corporation Limited Shine Corporate Limited, Spotless Group Holdings Limited, Seven Group Holdings Limited, Senex Energy Limited, WorleyParsons 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, for more information click HERE.

Guerdon Associates in the News

“Clawback regulation gaining traction”, Company Director, Volume 31, Issue 07, August 2015, p. 16

“Improving board evaluations”, Company Director. Volume 31, Issue 08, September 2015, p. 13

“Appraising board form”, Domini Stuart, Company Director. Volume 31, Issue 08, September 2015, pp. 48-51

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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.

ISSN 1834-8300