GuerdonNews® Volume 13 Number 6

July 2017

Dear reader,

 

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Welcome to the July 2017 issue of GuerdonNews®

 

In this monthly issue we:

• Consider board and executive remuneration governance in private organisations

• Identify issues that "hybrid" incentive plans need to address for investor acceptance

• Summarise how "free cash flow" is appreciated by equity analysts despite potential issues as an incentive measure

• Analyse ASIC's review of superannuation trustees' attention to their remuneration obligations

• Review the Tax Commissioner's changing perspective on employee remuneration trusts

• Suggest fairness, not inequality, may be a more appropriate basis for external stakeholder evaluation of remuneration

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What the CPA saga has taught: remuneration and governance in private organisations

Given the widely-publicised travails of CPA Australia over recent months, directors of private organisations can be excused for spending extra time thinking about their governance and disclosure obligations. 

A checklist is provided for not-for-profit and other unlisted organisations' boards to consider. 

Read more

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A faultless executive remuneration framework! We have a checklist

There; that got your attention.

Alas, there isn't one - a faultless remuneration framework that is (we still provide the checklist). But that has not stopped some institutional investors, executives and remuneration advisers trying to promote new remuneration ideas to solve all the remuneration committee's problems.

Activity has stepped up somewhat, as various remuneration committees and their advisers are bolstered by alternative frameworks that they believe are more acceptable. This is not necessarily so.

Guerdon Associates provides a checklist for committees considering a "hybrid" incentive structure.

Read more

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Using "free cash flow" as an incentive measure

Free cash flow, despite it being a non-standard measure, can be a valid performance indicator and measure of value creation for executive incentives. However, free cash flow can also be open to misunderstanding, misuse and abuse.

Guerdon Associates has provided a checklist to assist remuneration committees' consideration of, and reporting on, the use of “free cash flow” measures for incentive purposes.

Read more

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ASIC says superannuation fund remuneration disclosures inadequate

ASIC Deputy Chairman, Peter Kell, released details of ASIC's review of superannuation trustees' attention to their obligations in respect of "Transparency Information" (TI).

ASIC identified TI deficiencies in 21 superannuation funds that represented approximately 8% of APRA-regulated funds. Many of the deficiencies were associated with remuneration.

Read more

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Employee remuneration trusts: the Tax Commissioner thinks differently

It is, and has been, common practice of listed and unlisted companies to use a trust for employee incentive arrangements.

Trust arrangements for managing employee remuneration were usually for tax reasons. However, some of those reasons are no longer valid, as earlier views of the Tax Commissioner have now changed. Do not expect employee remuneration trust arrangements to deliver the outcomes that were promised in earlier days.

Read more

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It may not be inequality that is an issue, but fairness – a different focus in remuneration assessment and disclosure

The media use the relatively large sums of money that CEOs earn to elicit populist comments regarding inequality.

In fact, when people are asked about the ideal distribution of wealth in their country, they actually prefer unequal societies. The research reinforces decades of prior research which fails to to be explicitly considered by external stakeholders, or disclosed by remuneration committees.

Read more

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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.

Copyright © 2017 Guerdon Associates

ISSN 1834-8300