Historic Forum Reconciles Pay Issues Between Investors and Companies

In an Australian first, over sixty institutional investors, board directors, and corporate executives convened on 29 May 2007 to discuss the vexed issue of board and executive pay levels, structures and disclosure.

We sponsored the forum jointly with proxy advisor CGI Glass Lewis, which was hosted by law firm Allens Arthur Robinson in Sydney.

We were delighted with the outcome. The proxy firm CGI Glass Lewis agreed that its proxy advice would give latitude to executive remuneration innovations that diverge from investor guidelines. And investors indicated that they will consider performance measures other than relative TSR.  But it was not all a one-way street. For this to occur companies need to make a better fist of explaining their remuneration rationale in their disclosures.

The reaction of our board and management clients who attended was very positive, with a renewed commitment to improve what they put across to shareholders in a plain English, non-boiler plate style.

Likely trends in executive and board pay that surfaced at the forum included:

  • The introduction of executive performance pay measures other than relative total shareholder return (TSR).  It was evident in anecdotes from forum attendees that in many cases the Australian market is too shallow to provide enough valid comparison companies for this type of performance assessment.
  • Relatively high rates of increase in non-executive director pay for middle level and smaller listed companies to assist in the attraction and retention of well-qualified directors who are prepared to put in the additional hours now expected of them by shareholders and regulators.
  • More variety in executive pay plans to better tailor incentive arrangements to deliver improved shareholder returns.
  • Even greater relevance for proxy firms as institutional investors seek considered input on more complex and less homogenous pay plans requiring their consideration.
  • Greater latitude provided to boards that have earned a high degree of trust from investors by pursuing a superior disclosure process.

To get the full flavour, read the detailed forum communiqué here.

Mark your calendars. Next year’s forum will be held on February 12 in Melbourne. While attendees at this year’s forum receive precedence, if you would like to get in early for any remaining places contact us at info@www.guerdonassociates.com.

© Guerdon Associates 2024
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