After two deferrals last year to the start date, the new remuneration disclosure requirements applying to superannuation funds and their executive officers and individual trustees are proposed to commence on 1 July 2014. The stated aim of the new provisions is to bring super fund trustees and senior executives in line with provisions that apply to publicly-listed companies.
Who is covered?
The remuneration details of each ‘executive officer’ or ‘individual trustee’ is required to be disclosed under section 29QB(1)(a) of the Superannuation Industry (Supervision) Act 1993. The term ‘executive officer’ is defined to mean:
“a person, by whatever name called and whether or not a director of the body, who is concerned, or takes part, in the management of the body.” (emphasis ours)
The above definition is significantly broader than the Key Management Personnel (KMP) definition under section 9 of the Corporations Act. Section 300A of the Corporations Act requires disclosure of the remuneration arrangements for KMP.
KMP is defined under section 9 to have the same meaning as the accounting standards. Under AASB 124, KMP is defined as:
“persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity”. (emphasis ours)
The broader ‘executive officer’ definition means that it could potentially extend beyond senior management and executives to apply to line managers. That is, employees who traditionally are not in a position of requisite authority and responsibility.
What needs to be disclosed?
The relevant regulation (Regulation 2.37 of the Superannuation Legislation Amendment (MySuper Measures) Regulation 2013) is modelled on the existing requirements for listed companies under section 300A of the Corporations Act. The remuneration details required to be disclosed are extensive.
In addition to short term employee benefits like salary, fees and non-monetary benefits, the following are also required to be disclosed:
- Short-term cash profit sharing and other bonuses;
- Long-term benefits (including separate identification of any amounts attributable to a long-term incentive plan); and
- Equity and cash-settled share-based payments (with shares, units, options and rights being shown separately).
In addition to disclosing the kind of remuneration above, the following is also required:
- Terms and conditions attaching to each grant (including any applicable service and performance criteria but also the fair value, exercise price, first exercise and expiry dates per option or right, where applicable)
- The percentage of the bonus or grant (including options and rights) that was paid or vested and the percentage that was forfeited; and
- Estimates of the maximum and minimum possible total value of the bonus or grant.
Key questions for trustee Boards to consider:
- Who are the relevant ‘executive officers’ covered by the new regulation? How is management of the entity currently structured? When is a manager not an ‘executive officer’?
- Do we currently remunerate our ‘executive officers’ appropriately? Have we reviewed the overall remuneration mix, including short term and long term incentive arrangements? What is market practice?
- How do we currently benchmark remuneration of ‘executive officers’? Can/should we rely on external remuneration recommendations? On what basis can we rely on such recommendations? Should such recommendations be independent?
- What do we need to do to develop a new remuneration framework? What structure should the overall framework take? How do we align the interests of our ‘executive officers’ and our members? What key performance indicators and performance measures should we consider?
- Do we have sufficient capabilities and resources internally to meet the enhanced disclosure requirements?