Remuneration reports and votes – a primer
05/05/2008
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Some newly nominated directors may not be familiar with remuneration report requirements.  This article points the way to information sources available to directors and their advisors to find out more.

Under section 300A of the Corporations Act, a listed public company’s annual directors’ report must contain a discussion on remuneration of directors, secretary and senior managers in a separate remuneration report.

The remuneration report must include a discussion of the relationship between the remuneration policy and the company’s performance.

If an element of the remuneration package for a director, company secretary or senior manager is dependent on them satisfying a performance condition, the company must disclose:

• a detailed summary of the condition
• an explanation of why the condition was chosen
• the methods used in determining whether the performance condition has been satisfied.

Companies also have to explain why the company’s securities form part of the remuneration if the securities are given without satisfaction of a performance condition.

Sections 249L(2) and 250R(2) require that at a listed company’s AGM, the members vote on an advisory (non-binding) resolution that the remuneration report be adopted.

Even though a vote to reject a remuneration report is not binding, a company should explain to its shareholders what action, if any, it intends to take in response.

The Corporations Act is silent on the consequences if a Board proceeds with its remuneration proposals despite a negative shareholder vote.
Of course the shareholders may review their position when electing directors in the future.

For listed companies, Listing Rule 10.17 provides that members must determine directors’ fees and that any increase requires members’ approval. LR 10.17.2 provides that fees paid to non-executive directors must be by fixed sum. Similarly, LR 10.17 provides that remuneration to executive directors (salary or fee) must not include a commission on, or percentage of, operating revenue.

© Guerdon Associates 2024
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