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09/06/2023
For most Australian incorporated companies the financial year 2023 ends in exactly 17 days from the time you receive our newsletter. It is time to get to work. To ensure a smooth sail through the engagement period leading up to the AGM, we have put together a remuneration committee checklist.
1. Draft of the remuneration report
The Corporations Act 2001 requires directors to prepare a directors’ report that must include the specific details required under section 300A of the Act. These are captured in the remuneration report. This means the finance team, legal team, HR team, executive team and any others who are involved in the preparation of the remuneration report all do a great job – but it is the directors who own it.
The board chair and fellow directors will expect the RemCo Chair to be responsible for the remuneration report, ensure its timely preparation, and that it meets statutory and regulatory requirements. Most importantly, the report needs to succinctly and clearly communicate the board’s philosophy and approach on remuneration.
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What |
By Whom |
By When |
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Draft of the remuneration report
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Project manager that you nominated much earlier in the year |
A near complete draft should be ready before year end. |
The only numbers that are not yet available are the STI amounts for the year. Everything else should be known by now.
2. Draft of the RemCo chair introduction letter
If you already have the draft ready, you are well placed to ensure that all messages are tailored and captured as the results are finalised over the next two months.
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What |
By Whom |
By When |
|
Draft of the RemCo chair introduction letter |
RemCo Chair |
A near complete draft should be ready before year end. |
The checklist below can be reviewed to ensure that no items have been left out.
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Item to Cover |
Check |
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The key changes to KMP remuneration in the past year. |
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Specific issues of relevance for investors. |
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Summary outcomes of incentive awards. |
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Any particular event/s or matter/s that impacted remuneration outcomes (either positive or negative) and why. |
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Forecast of any change. |
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Will board discretion be exercised? Which way? Why? |
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Refer to the questions raised below particularly in relation to regulatory changes and determine whether they need to be referenced. |
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Remember, do not obfuscate. Investors’ antennae are particularly sensitive to remuneration report introductory letters that tell them little, say nothing new and have a lot of ‘waffle’.
3. Have a clear timetable to finalisation
Check the timetable now and see that it meets your requirements, and allowing for sufficient time to review and discuss with fellow directors.
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What |
By Whom |
By When |
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Timetable to finalisation |
Project manager |
Now |
4. Know the key issues for the year
Meet with the chair and investor relations team to agree on the key issues for the business during the year which have an implication for remuneration. These need to be agreed and well understood in preparation for engagement meetings.
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What |
By Whom |
By When |
|
Key issues discussion |
RemCo chair, board chair, and investor relations team |
Mid July |
5. Schedule the engagement meetings
Reviewing the key issues for the year will shed light on whether there needs to be a significant round of engagement meetings, or just a simple matter of checking with investors and proxy advisers as to whether they require a meeting.
You do not want to be wasting yours and their time if there are no specific issues that warrant a meeting.
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What |
By Whom |
By When |
|
Schedule the engagement meetings |
RemCo chair and investor relations team |
Mid July |
Some things to consider for the engagement meeting are:
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Item to Cover |
Check |
|
Which investors should you meet with? |
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Will you meet with each of the proxy advisers? |
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How will you engage with the foreign investors in particular as they often blindly follow proxy adviser reports. |
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Who will do the engagement meetings? |
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6. Set the agenda for the coming year
If the agenda has not already been set for FY24, it would be a good time to set it or at least review what has been set.
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What |
By Whom |
By When |
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Set the agenda for the coming year |
RemCo chair, board chair and CEO |
30 June |
Things to consider include:
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Item to Cover |
Check |
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Is the remuneration framework fit for purpose? |
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When was the last review of the framework? |
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What are the developing trends? |
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What alternative frameworks are being adopted, and why? |
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What feedback have proxy advisers given? |
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Have we got any attraction and retention issues? |
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What has been the feedback from executives? |
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Has the business strategy changed? |
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Have we considered APRA’s report on the self-assessments of culture and remuneration? It equally applies to non-APRA regulated companies |
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Do we need to do a market review of executive remuneration? |
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What regulatory changes are expected this year? Will your company be impacted by the Financial Accountability Regime (FAR)? |
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