Are rigid remuneration frameworks driving Australian companies to overseas exchanges?

Key Takeaways

As Australian IPO activity declines, corporate boards may increasingly look to list overseas or remain private to escape rigid, vanilla executive remuneration frameworks and stringent Australian remuneration requirements.

• Global IPO rates are on a downward trend, other than the US. The US is actively attempting to increase its IPO dominance. Proposed SEC amendments introduced on 19 May 2026 significantly dial back complex public disclosure requirements including substantial reductions for disclosure required of executive pay.
• While recent ASIC reforms aim to streamline the domestic IPO process they maintain Australia’s rigid compliance requirements for executive and director remuneration.

Company boards and remuneration committees pursuing an IPO must evaluate their existing incentive frameworks and any changes required once public to determine if the Australian market inhibits the flexibility required to secure high tier leadership in a competitive market.

Why would a company IPO?

There are many benefits to an Initial Public Offering (IPO) including access to a much deeper pool of capital, additional investment opportunities, brand visibility, and being able to provide employee incentives in liquid publicly traded shares.

However, it is not all sunshine and rainbows. With these benefits, comes costly regulatory and disclosure requirements accompanied by scrutiny from investors, media and proxy advisers. And, as has been observed in recent times, their requirements are not necessarily driven by the desire for a public company to deliver TSR. It may be more about their own TSR, associated with say, more media click bait, or attracting and retaining the assets of retail superannuants, or, proxy advisors retaining subscriptions. Executive remuneration is one of the areas that can be a significant deterrent to a company making the move to go public.

Recent developments in the US recognise this and amendments proposed on 19 May 2026 as part of the Securities and Exchange Commission’s (SEC) agenda to ‘make IPOs great again’ significantly dial back disclosure requirements on executive pay.

With IPOs in Australia declining and Australia being subject to some of the most stringent requirements on executive pay, it begs the question – is the Australian Securities and Investments Commission (ASIC) doing enough? And what can they do about executive pay?

What is the issue?

In private companies, executive remuneration is not subject to disclosure, oversight from proxy advisers or to shareholder votes. Private companies can pay their executives as they see fit to best incentivise them rather than to ‘tick boxes’ or meet rigid guidelines that do not always suit the nature of the company.

Public companies are subject to enhanced regulatory provisions, disclosure requirements, public scrutiny and voting. Remuneration needs to be designed to meet rigid guidelines. For example, an ASX listed company would find difficulty in:

• Paying fixed pay partly as share rights (none of the proxy advisers are supportive of RSUs);
• Paying a high growth tech CEO a commission on its key valuation metric of annual recurring revenue growth (an ASX listing rule);
• Paying a retail CEO 6 monthly incentives consistent with season cycles and a 2 year LTI based on store refurbishment payback timelines;
• Providing for a 7 year PE style mega incentive based on capital IRR;
• Paying 2 thirds of a biotech directors fees in equity, high enough to attract US directors skilled in FDA approval and commercialisation.

Some may think these restrictions absurd. They are. Yet they are real.

Reflecting this, IPO rates have faced a steady downwards trend. Regulatory burdens and administrative costs are among the most common factors in this decline.

On top of this, stock exchanges are facing an even tougher battle to secure public capital. For example, Citigroup on 11 June 2026 also announced the introduction of Digital Depositary Receipts on private shares which will allow global issuers and investors access to private equity through regulated blockchain infrastructure. With Citi acting as issuer and custodian, this will allow greater access to private shares, putting yet more downwards pressure on the number of IPOs.

But the ASX is faring worse.

In Australia the unique two strike rule means boards are much more likely to opt for conservative pay structures and risk averse strategies to avoid a strike by a minority of shareholders. By contrast in the US the “say-on-pay” vote is strictly advisory and cultural norms dictate much higher pay packages.

The ASX also only offers a main board listing, where the lack of secondary-board listing prevalent in other countries means that small and mid-cap companies are subject to the same compliance requirements and regulatory burdens as large companies. This further incentivises companies to list on growth focused markets of other countries, such as the London Stock Exchange (LSE) Alternative Investment Market (AIM) which only imposes an approach to ‘comply or explain’ with a corporate governance code. Guerdon Associates has previously looked at the corporate governance requirements for ASX companies listing on the AIM exchange.

Market practice of remuneration also differs depending on jurisdiction, with long term incentives (LTIs) in ASX-listed companies predominantly delivered in performance rights tied to relative TSR, and time vesting equity grants (RSUs) not commonly employed. US packages often include RSUs or options tied to stock price growth and companies have much more flexibility to issue large equity grants, often in lieu of cash salary and cash incentives.

Pay ceilings are also much higher in the US, while ASX-listed companies that try to adopt “Silicon Valley-style” remuneration packages are likely to trigger investor backlash, even if sourcing US talent or predominantly operating globally.

All of these issues make it difficult for ASX companies to pay so that they can attract and retain the best executives, leading to a loss of companies and talent overseas or to private equity and, consequently a paucity of new listings, and exits from public markets.

So what is happening in the US?

The US SEC has recently proposed significant changes to executive compensation disclosure requirements as part of their guidance ‘Enhancement of Emerging Growth Company Accommodations and Simplification of Filer Status for Reporting Companies’.

Companies generally fall into two categories: large, accelerated filers (LAFs) and non-accelerated filers (NAFs). LAFs remain subject to the current proxy reporting rules, but the threshold has been raised from US$700 million to US$2 billion – a staggering increase.

For NAFs, the following compensation changes would apply:

Reduced requirements:

• Two years of summary compensation table information instead of 3.
• Compensation disclosure required for 3 named executive officers instead of 5.

Eliminated requirements and disclosures:

• Compensation Discussion & Analysis (CD&A)
• Grants of plan-based awards table
• Option exercises and stock vested table
• Pension benefits table
• Non-qualified deferred compensation table
• Compensation policies and practices related to risk management
• Golden parachute disclosure
• Pay ratio disclosure
• Pay vs performance disclosure
• Say on pay, say on pay frequency, and say on golden parachute votes (‘SOP’ votes)
• Related Party Transaction policies and procedures

Comments for these proposed changes were set to close on 20 July 2026.

And what is Australia doing?

In a media release on 10 June 2025 ASIC announced it would clear a path for faster IPOs which Guerdon Associates summarised at the time. This announcement implemented 2-year trial reforms to streamline IPOs in Australia. However no changes were made to director or executive remuneration requirements.

On 23 July 2026, ASIC announced a principles-based proposal to simplify Regulatory Guide 264 Sell-side Research (RG 264), reducing the guidance from 42 pages to eight, to facilitate greater investment in the local market.

ASIC also released a proposal on 4 August 2026 to improve pre-IPO advertising flexibility and global alignment which aims to give companies listing on Australia’s public markets greater flexibility to advertise upcoming IPOs before lodging a prospectus, aiming to modernise outdated rules and align them with global standards while maintaining core investor safeguards.

What this means for ASX boards

While reforms are being made, ASX needs to do more. Boards need to have the flexibility to pay their executives in a way that can genuinely deliver pay for performance and shareholder value.

Boards should evaluate their readiness for IPO and if their remuneration frameworks can attract the talent they need.

Guerdon Associates have previously provided a checklist for IPO remuneration and governance considerations to assist directors to establish a sound and robust remuneration and governance framework which may provide some assistance.