The 2017 and 2018 reporting periods have seen increased shareholder activism, changes in emphasis and priorities expressed by institutional investors and proxy advisors, and a sense of urgency in addressing issues arising from the Hayne Royal Commission which are clearly observed as extending beyond the Financial Services Sector.
What role should incentives play in rewarding senior management?
The Australian Securities & Investments Commission issued Report 564 in January this year.
Boards, shareholders and proxy advisers are increasingly engaged in oversighting any company activity which fails to account for its exposure to risk, including short term incentive plans.
When ASX listed companies seek independent counsel on remuneration issues, remuneration advisers can find themselves faced with numerous scenarios which can result in conflict with a departing Executive, especially where the level of compensation as part of a separation or nominal resignation is being discussed.
The recommendations of the recently released Retail Banking Remuneration Review directly oppose the stance of many investors, who have become focused on basing executive bonuses predominantly on financial measures.
With regulators threatening to more closely scrutinise corporate culture, Directors will be looking to exercise all of the levers in their control to influence its development, including remuneration.
This AGM season Boards will be looking to ensure that short term incentive plans are consistent with institutional investor and proxy advisor expectations of pay for performance. Egan Associates has explored the link between short term incentive payments for CEOs and company profit improvement in the ASX 100.
CEOs of small companies are by no means guaranteed an annual bonus.
The Australian Senate passed changes to the taxation of employee share schemes (ESS) on 25 June with no amendments.