From time to time, there is discussion of the function and effectiveness of disclosure in regard to executive reward.
This article is based on Egan Associates’ submission to Treasury during the consultation process. It includes the results of further research into the effects of
Employers and employees will be pleased to see that the Assistant Treasurer, the Hon. Chris Bowen MP, has announced a consultation process on the budgeted tax changes in regard to employee share plans.
The present crisis in financial and capital markets highlights issues which have been raised in the Australian, US, UK and European parliaments regarding the independence of external advisors and their level of engagement in the provision of professional services to corporations.
While there is a significant focus on substantial rewards paid to senior executives in major corporates, the facts reveal that outside the top 100 companies only a small percentage of senior executives, including Chief Executives, receive salaries plus annual incentives to a combined value of $1,000,000.
Over the past decade the average level of market capitalisation of a top 100 company increased from less than $4 billion to $12 billion, with profits escalating from around $350 million to an average in excess of $1 billion.
Executives are not isolated from the broad market pressures affecting many constituents and certainly all investors. To profile an executive as an individual isolated from
Traditionally there has been at the level of CEO and direct reports a strong correlation between base pay, annual revenues and market capitalisation and an even closer relationship to total reward (that is fixed pay plus annual bonus plus the value of long term incentives), and growth in market capitalisation and a company’s level of profitability.
Egan Associates has over the last twenty years since the Corporation Law required comprehensive disclosure, compiled research data on non-executive directors’ emoluments, board demographics and related information.
Government leaders and their advisors internationally have recently expressed concern about the reward levels of those involved in financial markets which are embroiled to a greater or lesser extent in the global liquidity and credit crisis now being experienced and its flow-on effect to the capital markets.