The Challenge :With assets located offshore and listing on dual exchanges, a resources company required guidance on how to remunerate expatriate executives and board members located in several jurisdictions. Egan Associates was asked to advise on a proposal under consideration that involved either fully paid shares or share rights to directors. In providing a solution that supported the attraction and retention of the right talent, as well as being reasonable within the context of Australian Corporations law and the ASX Best Practice Corporate Governance Guidelines, Egan Associates provided advice that addressed the following issues:
- should securities vest on a pro-rata basis annually or at the end of the defined period?
- if the director leaves prior to the vesting date, should they forfeit the securities or should they be issued on a pro-rata basis?
- would a reasonable structure of remuneration consist of a number of securities vesting over a defined period plus cash compensation?
- should the arrangements be agreed with the director at the time of their re-election to the board for a further three year period or should an arrangement be entered into on the basis of annual grants?
- should a non-executive director’s equity program be separate from that of executive directors and other staff?
- should performance hurdles be attached to the allocation of equity to non-executive directors, either in part or fully?
Outcome : A remuneration plan was designed to distinguish between executive and non-executive directors and the varying contributions each group made to the business. It was able to be used to attract top talent to the organisation. The plan also met the tests of reasonableness.