Guerdon Associates examined the Minimum Shareholding Requirement (MSR) policies of non-executive directors in the ASX 100. Data was recorded from the latest available company Annual Reports.

Our report first analyses MSR policies in the ASX 100, before breaking it down by GICS Sector.

Table 1: Presence of MSR policies and guidelines in the ASX 100

Eighty-six companies in the ASX 100 have a defined MSR policy or guideline for both the chair and non-executive directors. Fourteen have not disclosed any policy or guideline.

Despite not having a formally disclosed MSR policy or guideline, Computershare and Sonic Healthcare have a statement within their Annual Reports explicitly encouraging NEDs to hold shares for alignment of interest with shareholders.

Eight companies with an MSR policy or guideline did not disclose the number of years given to achieve, yet half of them require the MSR policy to be met within a “reasonable period”.

Table 2: MSR policies and guidelines in the ASX 100 – Chairs

 

The number of years given for non-executive directors to achieve minimum shareholding requirements is identical to that of the chairs for all but one company.

Sixty-eight companies have disclosed the non-executive director MSR policy as a percentage of base fee, with an average of 118%. Seventeen companies instead disclose it as a percentage of the total fee (base plus committee fee).

The narrow quartile range suggests ASX 100 market practice for both chair and NED MSR of 100% of base fee (or chair fee) over 4 years. The three US dual-listed companies are well above this, with minimum shareholding requirements of 500% for both the chair and other non-executive directors.

Policy and Guideline Disclosure by GICS Sector

Tables 4 shows the differing MSR policies and guidelines within the ASX 100 by GICS sector.

Table 4: Presence of MSR policies and guidelines by GICS Sector

The Health Care sector was the least likely to disclose an MSR policy or guideline.

Of the eight GICS sectors with an MSR guideline, up to 30% of companies within a given sector disclosed a guideline.

Minimum Shareholding Requirements by GICS sector

Table 5 summarises the differing MSR policies by GICS sector, utilising the sample of 71 companies that disclose MSR policies as a percentage of chair fee.

Table 6 analyses the MSR for standard non-executive directors where it disclosed as a percentage of base fee.

Table 5: Average MSR for Board Chair by GICS sector

Overall, chairs have an average MSR of 114% of their chair fee, expected to be achieved over an average of 4.3 years.

Table 6: Average MSR policies for Non-Executive Directors by GICS sector

© Guerdon Associates 2024 Back to all articles