As AGM season looms, board chairmen and directors are considering those inevitable questions from the floor. Are you ready for all of them? Have you anticipated the concerns of shareholders? What’s the right response to their concerns?

Here is a checklist of a few of those questions that may surface from shareholders.

CEO pay

•  Why is the CEO’s remuneration so high when the company’s performance in the last three years has not shown any significant improvement?
•  The CEO’s fixed pay has increased by x% in the last year when EPS and other financial metrics have deteriorated:
  •  Why has fixed pay increased during the time of weak performance?
  •  Why should shareholders support the remuneration report?
•  What has the CEO done to get the “bonus” you have paid him/her?
• Why did the CEO get an STI payment when dividends did not increase/were reduced and profit has remained flat?
• How did the Board determine the pay structure for the new CEO?
• Why is the new CEO paid more than the CEO who has been replaced?
  • How did you determine an appropriate level?
  • How have you structured the buy out of prior benefits to take into account performance?
• Why has the LTI vested when the shareholder returns have compounded at less than the bank interest rate?
• Why have the STI performance measures not been disclosed?
• How did the Board determine the STI performance measures?
  • What other measures were considered?
  • Why were they rejected?
• Why does the CEO get half of his/her STI entitlement simply for achieving budget? Isn’t that what their fixed pay is for?
• Why is underlying/adjusted EPS used for the determination of the EPS growth for the LTI? Management have been responsible for those charges/costs/acquisitions etc so why are they excluded when calculating the EPS growth rate?
• Why is the CEO’s STI have greater weighting than the LTI?
• What did the CEO achieve to warrant the level of STI payments awarded?
• The pay structure permits STI payments for non-financial results when the financial performance has not been satisfactory. Why should the shareholders support this position?
• The non-financial STI measures appear to be what we ordinarily expect the CEO would be required to do in any event. Why is an STI payment being made for what is expected of the role?
• The company has a history of making consistent STI payments broadly of a same amount. Why is this called a STI when it appears to be like fixed pay?
• The company did not disclose the STI performance measures last year for this year’s STI on the basis they were commercially sensitive. Can you now advise the performance measures retrospectively?
• What is the Board’s rationale for using an EPS hurdle for the LTI rather than a measure of ROE or similar returns measure?

 

Board remuneration

• Why is the Board seeking an increase in the director fee pool if there is no immediate need for it?
• How can you justify the significant increase in Board fees?
• Why doesn’t the company have a minimum shareholding policy for the directors of the Board?

Board diversity 

• What action has the Board taken to improve the diversity on the Board?
• Does the company have targets to improve the gender balance on the board?
• What is the average pay difference between men and women? Why? What is the board doing to rectify this?

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