ASX Governance Council Changes Catch Hedging Of Executive Options

Guidelines on senior executive pay composition are largely unchanged from the prior version of the guidelines except in one important respect.

Recommendation 9.2 (currently 9.3) is about distinguishing between the structure of senior executive and non-executive director remuneration. The boxes outlining the recommendations on appropriate guidelines for senior executive and non-executive director remuneration are now included in the same recommendation. The headings for these boxes are now consistent. Box 9.1 has been revised to refer to “senior executives”. Point 3 of Box 9.1 has been revised to make it clear that the principles recommend that the terms of equity-based remuneration schemes should prohibit “hedging” of unvested entitlements. The guide to reporting on Principle 9 also includes a reference to this prohibition.

Given that it seems highly likely that the Treasurer will release amendments to the Corporations Act that will also discourage hedging, these new guidelines may be redundant before they are effected. In this regard we know we have been saying this for 3 months now, but senior officials in Treasury assure us that it is imminent.

For related articles in this ASX Governance Council’s principles amendments series, see:
Major Changes to ASX Good Governance Principles
ASX Governance Council Requires Evaluation Of Directors And Senior Executives
ASX Governance Council Removes Remuneration Disclosure Recommendation

ASX Governance Council Recommendation Requires That Many Companies Change Their Remuneration Committee
ASX Governance Council Removes Guideline For Disclosure Of Non-Executive Director Retirement Benefits
ASX Council Unsure On Senior Executive Equity Pay
ASX Governance Council And ASX Not Sure Where To Go On Director Equity

© Guerdon Associates 2024
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