ASIC sends another warning to companies for improved remuneration reports, and says that companies must take steps to control who votes

On Sadie Hawkins Day (29 February 2012), ASIC again called on companies to improve the disclosure of their remuneration arrangements for directors and executives.

The call for improvement follows a review of 50 remuneration reports – drawn from 300 of Australia’s biggest companies – for the year ended 30 June 2011.

ASIC undertook a similar review last year of 60 remuneration reports (see HERE).

ASIC observed that some companies, particularly those with more advanced reporting practices, already had improved their disclosures following ASIC’s release last year. However, there are still some companies that need to provide more effective disclosures in compliance with section 300A.

‘It is important for the integrity of the market and investor confidence that there is a high level of compliance with the executive remuneration laws,’ ASIC Deputy Chairman Belinda Gibson said.

‘This year’s review showed that companies could still improve their disclosure in order to provide shareholders with a better understanding of why directors have adopted the remuneration arrangements they have.

‘Directors must provide sufficient detail on the remuneration arrangements to enable shareholders to assess the appropriateness of them in the company’s circumstances.’

ASIC provided examples of the disclosures that some companies made which illustrate better practice (see HERE).

ASIC also surveyed how listed companies have managed the new voting exclusions that prohibit key management personnel (KMP) and their closely related parties voting on the resolution to adopt the remuneration report.

ASIC examined procedures adopted by 12 ASX300 companies that held their annual general meeting between 21 October 2011 and 23 November 2011. The survey, while small, does provide some helpful hints on what companies can do to better ensure compliance.

Procedures used by some companies that others could adopt to provide the Chair of the meeting with greater confidence that only those votes that are permitted under the law have been counted, include:

  • requesting KMP to advise their closely related parties of the voting prohibitions
  • providing members of the KMP with a pro forma letter with instructions for nominee companies or trusts on not voting their shares
  • seeking assurances from KMP that they will not cast votes, and
  • confirming that the share registry service provider, if used, has excluded the relevant votes.

Last year the Chartered Secretaries Australia (CSA) also issued useful guidelines for companies to manage voting exclusions on remuneration-related resolutions (see HERE).

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