Welcome to the December 2015 issue of GuerdonNews^®

In our final issue for 2015, we:

• Note that the government's innovation statement has some teasers for employee share scheme reforms

• Suggest you save the date for our 10th annual forum on executive pay and corporate governance issues

• Summarise ACSI's latest report on ASX200 non-executive director pay

• Discuss the positives and unintended consequences of requiring board directors to hold equity

• Delve into the implications a lower long-term economic growth rate has for executive remuneration

• Alert you of APRA's special team formed to investigate risk culture and remuneration

• Summarise the UK Investment Association's revised remuneration guidelines and the extent they could influence Australian guidelines

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

We look forward to reporting board governance and executive remuneration news to you again in 2016, with our first monthly issue to be delivered on the first Tuesday in February. In the interim we will as usual be working for our clients throughout January.

From all of us in Guerdon Associates, best wishes for a safe, happy and prosperous New Year.

Government's innovation statement has teasers for employee share schemes

Promises to make it easier and more commercially viable

The government released its innovation statement promises to make employee share schemes easier to implement.

Read more

Save the date – 2016 Remuneration and Governance Forums

This seminal event will take place 10 March in Sydney & 8 March in Perth

The forums, co-sponsored Guerdon Associates and CGI Glass Lewis, will provide an environment for directors and institutional investors to candidly discuss remuneration and governance issues.

Company executives, government regulators and in-house company remuneration advisers are also invited; however, news media are excluded.

Read more.

ACSI: Board Composition and Non-Executive Director Pay in ASX200 Companies

This is its 14th ACSI report on the composition of S&P/ASX200 company boards

As in previous reports, focus is placed on director roles, gender, fees, tenure and age. For the second report in a row, ACSI includes a section on ‘skin in the game,’ which reviews directors' personal ownership in each of the companies he or she governs.

Read more.

NED shareholdings and diversity requirements may run counter to each other. 

An answer may be pre-tax equity in place of fees 

Board remuneration has remained relatively stable since the GFC. However, in the past two years, investor guidelines have heightened the importance of non-executive directors holding equity.

Holding guidelines can be met with after tax income. Though these policies align the interests of NEDs with shareholders, they also discourage board diversity, given that women NEDs tend to be younger, and income from NED fees is more important given that they have had less time to accumulate wealth. However, using pre-tax equity instead of cash to meet shareholding requirements may go half-way to resolving this issue.

Read more.

A lower long-term economic growth rate – the implication for executive incentives

Boards may consider pay vehicles that encourage more risk

The Australian Treasury’s long-term economic forecaster has lowered the expected long-term economic growth rate from 3% to 2.75%. At the same event, the Reserve Bank governor said that shareholders should lower their expectations of ever rising dividends. The alternative is for shareholders to accept the need for companies to take on more risk to generate higher profits

All of this has implications for how executive pay is delivered (payment vehicles), performance measures, performance periods and deferral periods.

Read more.

New APRA team with exclusive focus on remuneration, culture and governance to crack the whip on remuneration in 2016

Banks and insurers vary in their effectiveness in meeting culture and remuneration requirements

APRA has a newly created team that will primarily focus on improving supervisory scrutiny of the specific requirements set out in existing prudential standards.

APRA’s immediate priority is the area of risk culture, and in particular how banks and insurers are implementing the requirements of CPS220 Risk Management, which came into effect at the beginning of the year. Their next priority will be to review the current state of remuneration arrangements within ADIs and insurers.

Read more.

New UK investor remuneration guidelines.

A probability that many will be replicated in Australia

The UK Investment Association released an update of the current remuneration guidelines which have a significant influence across the investor community both in the UK and in Australia.

The guidelines recommend that long-term incentives should not pay out until at least five years after the date of award. This would still allow for the usual three-year performance period, but a further holding period of two years would have to be in imposed.

This is a trend we are seeing in Australia, although the take up rate has been limited to ASX100.

Read more.

Latest GuerdonData^® Updates

Updates to GuerdonData® include disclosures from the following 8 companies:

Aristocrat Leisure Limited, Australia and New Zealand Banking Group Limited, Duluxgroup Limited, Elders Limited, Graincorp Limited, National Australia Bank Limited, Orica Limited and Technology One 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.

SUBSCRIPTION INFORMATION

This email was sent to: subscriber
To manage your membership details including subscriptions click Edit your subscription
If you would like to unsubscribe from this email newsletter please click Click here to unsubscribe

TELL A FRIEND
Forward this email onto a friend here

FEEDBACK
Your comments and questions are welcome. Send them to info@www.guerdonassociates.com

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.