Unanimous disapproval of Australian government’s 2 strikes legislation by all stakeholders – latest survey results
Over 100 representatives from the four main governance constituencies – major superannuation funds, fund managers, non-executive directors and senior executives – attended the 5th annual CGI Glass Lewis & Guerdon Associates Remuneration Forum held in Sydney on 21 March, 2011 to discuss key current issues in the area of executive remuneration.
Participants were asked to provide anonymous feedback on the topics of the two main Forum sessions by completing a questionnaire distributed at the end of each session.
The answers to those questionnaires have been analysed by an experienced Sydney University researcher, Maroun Elias, who is independent of CGI Glass Lewis and Guerdon Associates.
The results of his analysis are below.
Responses to Session 1 Questionaire
the Productivity Commission recommendations
The answers to the questionnaire on this topic indicated very strong opposition, from both corporates and institutional investors, to the government’s ‘two strikes’ test (94% opposition) and quite strong opposition to its remuneration consultant (67%) and “no vacancy” (63%) legislative changes.
Notwithstanding their opposition to the ‘two strikes’ test, a majority of answers from corporate participants indicated that they were prepared for its proposed introduction on 1 July 2011.
Inclusion of a sunset clause
KMP participation in non-binding vote
A summary table of the support for and opposition to key elements of the new legislation, plus the value that should be used for reporting equity-based remuneration, is provided overleaf.
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| SUPPORT for and OPPOSITION to the new legislation (nearest whole %)
|
| ||
| Yes | No | Ambiguous
|
| |
|
Introduction of the ‘two strikes’ test
|
0% |
94% |
6%
|
|
| Disclosure and engagement rules in relation to remuneration consultants
| 29% | 67% | 4% |
|
| Prohibition of KMP participating in the non-binding vote
| 81% | 14% | 5% |
|
| Prohibition of hedging KMP’s incentive remuneration
| 76% | 19% | 5% |
|
| Requirement for shareholder approval before public companies can declare ‘no vacant’ board positions
| 32% | 63% | 5% |
|
| Introduction of new rules relating to ‘cherry picking’ of proxies
| 77% | 23% |
| |
| Requirement of remuneration disclosure for only the KMP of the consolidated entity
| 90% | 10% |
| |
| Reporting of equity-based remuneration on value at date of grant rather than amortised value
| 39% | 56% | 5% |
|
Responses to Session 2 Questionaire
Topic – Are governance guidelines frustrating the proper design of company- specific executive remuneration?
70% of the responding participants said that governance guidelines, such as those by proxy advisers, do not frustrate the proper design of company- specific executive remuneration.
This is probably because most influential guidelines recognise that remuneration structures should be tailored to fit the circumstances of each company and that, consequently, remuneration structures that depart from established guidelines may be appropriate for individual companies – and will be supported if they are cogently explained and justified.
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– Notwithstanding this, 67% of the responding participants considered that Australian governance guidelines and legislation do take sufficient account of the expectations of overseas executives, with some participants suggesting that the “war for talent” is overstated, particularly as the governance guidelines do not mandate a cap on executive remuneration.
– – Some responding participants commented that the governance guidelines help companies to engage with their shareholders and other stakeholders to determine what the market deems appropriate and acceptable practice.