ASIC cracking the whip on remuneration reports

As listed companies prepare for the release of their 30 June 2011 financial reports, the Australian Securities and Investments Commission (ASIC) has called for companies to provide more clarity on the remuneration arrangements for their directors and executives.  ASIC has identified a number of areas where disclosure to shareholders can be improved based on a review of 60 remuneration reports for listed companies for the year ended 30 June 2010. 


The ASIC advisory release of 30 June 2011 is about 4 years behind similar moves by the US’s SEC in improving their standard of compensation reporting compliance (for example, see HERE).  It also follows years of comments from a multitude of stakeholders to the Productivity Commission, Treasury and Senate Economics Committee executive pay enquiries, and other forums, that ASIC does not enforce compliance requirements.


Given that Australia’s remuneration reporting requirements fall under the same regulatory compliance regime identified in the Centro Case (see HERE), this advisory is a timely and cautionary warning shot across the bows that should have directors of most companies concerned.  Why?  Because most companies do not come close to the standards required in the s300A reporting requirements and identified by ASIC.


The primary areas identified by ASIC as requiring improvement are:


·    the board’s policy on the nature and amount of remuneration of the key management personnel;

·    the non-financial performance conditions in short-term incentive plans;

·    why performance conditions have been chosen; and

·    the terms and conditions of incentive plans.


ASIC has helpfully included some of the better examples of disclosure on each of the four areas for improvement observed during their review.


The ASIC advisory with examples can be found HERE

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