EA News Round-up

Remuneration and governance news round-up

We keep you informed with the latest news from around the world.

Australia

Treasury whitepaper on Superannuation

The Treasury Department has released a discussion paper on a number of superannuation themes, including regulation and governance.

The paper broaches the question of how an independent Director should be defined for superannuation organisations, whether superannuation Board Chairs should have to be independent and what proportion of a superannuation Board should be independent. Assistant Treasurer Arthur Sinodinos has indicated he agrees with the ASX guideline and APRA regulations that Boards be majority independent.

Board renewal and effectiveness are also addressed, with the paper asking whether there should be maximum appointment terms for directors and if so, what should they be, as well as asking whether the Boards should have to undergo regular Board reviews.

There has been significant protest from superannuation Boards to mandating levels of independence, saying that the current model is working well for fund members.

Consultation is open until February 2014.

Proposed incentive scheme changes

ASIC released a Consultation Paper and draft Regulatory Guide on 14 November 2013 relating to employee incentive schemes.

The Paper and Regulatory Guide proposes to expand the disclosure relief for schemes under ASIC Class Order 03/184, desiring to adjust for market practice and ease the burden of offering share schemes where the benefits of the scheme outweigh risks to employees.

For more detail, see our article on the release.

Global

EU heads towards mandatory gender diversity quotas

The EU parliament has voted for a proposal that would force large listed companies across the EU to hire women for 40% of Board posts by 2020. The mandatory quotas, proposed at the end of 2012, had attracted a significant amount of criticism; many nations (including the UK) believed it should be up to the EU member states to chart their own path to gender diversity on Boards, while others believe all candidates must be appointed on merit.

The proposals now go to the 28 EU member states for approval, with the possibility that a bloc of nations will oppose the legislation and prevent it becoming law.  

Swiss decide against executive pay caps

Swiss voters have rejected a proposal to limit annual executive pay to 12 times the amount a company’s lowest paid worker earns in a month. Outrage over outsized pay-packets had spread following the government bail-out of Switzerland’s biggest bank UBS: Swiss voters had already waved through another referendum earlier in 2013 which proposed 24 initiatives including a binding annual shareholder vote on executive pay; a ban on severance, sign-on and merger payments; and the introduction of annual elections for Board Directors.

However, large companies stated that the rule would damage Switzerland’s attractiveness as a business location.

Investment Banks tighten pay

According to a Financial Times analysis of quarterly reports, nine of the largest US and European investment banks are depressing employee pay despite profit increases, shifting returns from employees to shareholders. The banks have set aside only $51.4 billion for employee pay (including salaries, bonuses and other benefits) for the first nine months of the year, 5% less than the same period the year before. Meanwhile, profits have risen 10%. The cuts are more marked in European than US banks, with the EU’s bonus cap likely to further differentiate pay between the regions.

Action on NZ golden handshakes

New Zealand MP Paul Goldsmith has introduced a Bill that may reduce the likelihood of executives receiving golden handshakes.  The Bill proposes the removal of the automatic right to personal grievance for employees earning salaries of over $150,000. This would mean that if such employees were paid out under the terms of their contract, they would be unable to start a personal grievance case to try and get a higher payout. Employers told Goldsmith that as the law currently stood, the threat of a personal grievance case meant they would put up with someone who was not doing the job well or offer a generous golden handshake to “make the problem go away”. There has been some support for the Bill if the threshold were raised.

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