GuerdonNews® Volume 11 Number 9

October 2015

Dear reader,

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Welcome to the October 2015 issue of GuerdonNews®

Now that the football season has ended you may have time to catch up on the latest in board governance and executive remuneration. In this issue we:

• Acknowledge the recent ACSI CEO remuneration survey report's focus on vested pay value

• Reckon that the UK Investment Association may be a tad optimistic in its laudable aim of simplifying executive long-term incentives

• Report that ASIC found some superannuation websites lacking in meeting transparency requirements on remuneration and other governance matters

• Note that the OECD's corporate governance principles have changed, with some interesting additions that should interest Australian governance stakeholders

• Review recent research that tries to explain why U.S. executives working for strong brands accept lower pay

• Recognise that ASIC’s focus on corporate culture is no passing phase as it releases its 4-year strategic plan

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

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ACSI annual CEO pay survey emphasises need for reporting vested pay value

Their underlying message is important when considering future disclosure

ACSI has published its 14th study of CEO pay. Consistent with last year, they have again analysed CEO pay that had vested, as opposed to CEO pay that had been granted. While we would prefer better precision in ACSI’s terminology to distinguish between "realised" pay and "realisable" pay, the underlying message is that disclosures frequently fail to report on the pay value that has vested. Of course it varies from the estimated fair value of the pay granted, which companies must disclose. But ACSI's point is that it is difficult to assess policy unless you know what the outcomes are.

Their report identifies the amount individual CEOs really earned.

Read more.

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UK Investment Association considers fundamental Long Term Incentive changes

While highly motivated to simplify LTIs, getting asset managers and investors to agree will be an unusual outcome

Increasingly, investors are seeking LTI alternatives that will clearly incentivise high performance from executives. In London, the UK Investment Associations' Executive Remuneration Working Group has been assembled to do just that.

Over a 6-month period, the committee will come up with proposals that could result in an overhaul of the way Britain’s top public company CEOs are paid.  It was mentioned that if the Group could propose valid executive reward alternatives, long-term incentives may be removed altogether. Rather than eradicating LTIs altogether, another alternative suggested could be introducing systematic LTI plans that include setting fixed vesting.

Read more.

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ASIC reviews executive pay and governance transparency on superannuation websites

For the websites not meeting requirements, suggestions for improvement have been made

The Australian Securities and Investments Commission recently reviewed superannuation websites to evaluate whether they have properly adapted to the Stronger Super reforms implemented in 2013. Though ASIC has found that the majority of superannuation trustees have successfully implemented the transparency reforms, there are still those who have not.

Based on findings, ASIC has provided recommendations to improve online disclosure of transparency information. Among others, these suggestions include providing a link to transparency information on a superannuation's website homepage, frequently updating websites and including voting summaries on both international and Australian listed shares.

Read more.

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OECD releases new corporate governance principles

Some interesting additions identify global governance shortcomings

OECD has recently released updated corporate governance principles at the G20 Finance Ministers September 2015 meeting in Ankara. These principles were first developed by the OECD in 1999 and last updated in 2004.

The updated guidelines include a new chapter on institutional investors, stock markets and other intermediaries. It seems conflicted financial advice must have been of interest to more G20 countries than just Australia. It also warns of other conflicts of interest. Of interest to Australian entities with securities also listed on the TSX, LSE, NZX and other exchanges, the chapter contains new principles with respect to cross border listings and the importance of fair and effective price discovery in stock markets.

Read more.

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Employee-based brand equity: why companies with strong brands pay their executives less

Is the status afforded by a particular brand reason enough to accept lower pay?

A recent publication suggests that executives who work for U.S. companies with strong brands tend to be paid less than if they worked for a company with a less-recognisable brand. Working for recognisable brands provides "self-enhancement" for executives, which researchers suggest acts as a substitute for pay. According to the researchers, the negative effect of brand strength on executive pay is strongest for CEOs and for younger executives.

However, this willingness to accept lower pay could be a result of other factors not fully researched. For example, working for a well-known brand can boost an executive's resume, leading to higher pay later on in their career.

Read more.

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ASIC’s focus on culture, governance and pay

It features prominently in ASIC's 4-year plan, indicating that boards should consider a permanent oversight process 

On 31 August, ASIC published their corporate plan for the next four years.  According to their report, one of their major priorities for the years ahead is to “promote investor and financial consumer trust and confidence.” They plan to accomplish this by promoting positive and transparent gatekeeper conduct and culture.

Remuneration governance is featured as a key component of culture management.

Read more.

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Latest GuerdonData® Updates

Updates to GuerdonData® include disclosures from the following 122 companies:

AAD, ADH, AGL, AHG, AIA, AJA, AMC, ANN, APA, ARB, ARF, ARI, AZJ, BAL, BAP, BEN, BGA, BHP, BKL, BLD, BRG, BSL, CAB, CAR, CCP, CGF, CHC, CLH, CNU, COH, CPU, CQR, CSL, CSV, CTD, CWN, DCG, DMP, DNA, DSH, DUE, EGP, EHE, EPW, EWC, FDC, FMG, FXJ, FXL, GBT, GDI, GMA, GMG, GUD, GWA, GXL, HFA, HFR, HSN, HVN, IFL, IFN, INA, IPD, IPH, ISU, JBH, KAR, LLC, LNG, MLD, MML, MOC, MPL, MRM, MSB, MTU, NCM, NSR, NST, NVT, ORA, ORE, ORG, PBG, PPT, PRT, PRY, PTM, QAN, REC, REG, RIC, SAI, SCP, SDF, SGF, SGH, SGP, SHL, SKT, SPK, SUL, SXL, SYR, TAH, TCL, TGR, TOX, TPI, TRG, TSE, TWE, UGL, UXC, VED, VLW, VRL, VRT, WBA, WES, and WOW

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.

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