Halt the erosion of trust between boards and investors: Save this date

The afternoon of 9th March in Melbourne, and morning of 13th of March in Perth

There is no doubt that 2016 has been a torrid year for ASX 300 companies and their investors, as both come to grips with the vote outcomes on remuneration matters. Both sides are recognising the loss of trust and respect.

Guerdon Associates has heard first-hand, gross generalisations that boards have been “sneaky” and executives “greedy”, while investors and their advisers have been “lazy”, “lack competence”, and are “not transparent”.

There is fault here. And it has been on both sides.

On the one hand, clearly, there have been instances of “sneakiness” and “greed”. The perceptions of sneakiness and greed have not been helped by some incoherent disclosures, especially around the basis of incentive payments. This drives proxy advisers and investors to think that something is being hidden.

On the other hand, there has equally been an inability by investors and their advisers to comprehend, much less evaluate, some issuers’ business complexities and corresponding remuneration practices. It has not helped that investors and some of their advisers do not have sufficient time and resources, or have not maintained consistent standards of quality control in their reviews of remuneration reports.

While in the minority, these instances have been eating away at the patience of both boards and investors.

Engagement is in danger of becoming a cynical exercise, whereby suspicion and wariness have replaced openness, understanding and constructive discussion. It is getting rapidly to the stage where proxy advisers and investors will no longer give any company the benefit of the doubt, while it is probably the case that most are deserving of it. Beyond this, media wars and sensationalism have the potential for hysteria leading to a populist backlash that, on the evidence, is simply not warranted. Such an hysteria and backlash in no way reflect the fundamental fairness of Australian economic outcomes, particularly having regard for the outcomes in other countries.

We need to be aware, and nip this in the bud.

This will be one of two areas of focus at our 11th Remuneration and Governance Forum, co-sponsored by Guerdon Associates and the proxy adviser CGI Glass Lewis.

Save the date – the afternoon of 9th March in Melbourne, and the morning of 13th of March in Perth.

The other focus is the extent that Environmental, Social and Governance (ESG) factors have been used by institutional investors to value and trade into, or out of companies. This is the hard edge of ESG. No namby pamby.

Directors need to understand the weightings (generally more on the “G”), and the importance of disclosures (again).

So, this year we have a panel of investors to tell you how they do it, while directors have the opportunity to question how valid this is for their situation. Simple things can shift a company’s value.

In Melbourne, two esteemed protagonists will have the Great Debate on the utility, or otherwise, of director independence – “Director independence is over-rated – why we need fewer independent directors”.

If you think independent directors are as useful as an ashtray on a motorbike, or that entrusting shareholders’ funds to a non-independent director is as safe as a brick house in Christchurch, come to this Forum.

Having got worked up over the debate, we will settle you down with a drink or two afterwards – a great opportunity to continue the networking with directors, investors and executives.

In Perth we will continue the tradition of the proxy adviser and investor roast. Note, that rotten eggs and over-ripe fruit are to be left at the door. Other than that, you are welcome to attend and let fly. After a bit of a floor mop, lunch will follow.

Invitations will be sent in late January to institutional investors, company directors, regulators and company executives. News media will be excluded. Openness is encouraged (and “offenders” will be identified – so if you have a point of view – turn up).

As in past Forums, the Chatham House Rule applies.

Watch your inbox for an invitation. If you think you may not be on the list, let us know.

By the way, when you get the invitation, act fast. The last time the Forum was in Melbourne, we ran out of room for all who wanted to attend. Perth, last year, was also full.

We look forward to seeing you at the Forum.

© Guerdon Associates 2024
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