The Agenda – March


Australian workforce

  • The Australian Bureau of Statistics recently updated its Average Weekly Earnings and Wage Price Index. AWOTE (average weekly ordinary time earnings) increased by 1.7% for the year to November 2015 while the Wage Price Index increased 2.2% (the lowest rate of annual increase since the records began in 1998). Inflation was 1.7% for the year to December.

  • The unemployment rate fell in February to 5.8% because fewer people were looking for work.

International competitiveness and taxation

  • The Business Council of Australia released a tax directions discussion paper, noting that focusing on the effects of a comprehensive tax package rather than the effects of selected reforms would better sell the case for tax reform. It argues that Australia’s tax rate is not globally competitive and that reducing the company tax rate would stimulate investment and jobs. It recommends exploration of a number of tax reform options, such as tightening superannuation caps, tightening work related expenses, reducing the capital gains discount, broadening the base of land and payroll taxes and phasing out stamp duty. The complete paper can be found here.

  • The government has tasked the Productivity Commission with conducting a study to develop criteria to assess the efficiency and competitiveness of the superannuation system and an inquiry to develop alternative models for a formal competitive process for allocating default fund members to products.The Commission has released issues papers and is asking for submissions by April.

  • The Switzer Super Report has compiled a list of potential superannuation tax changes that could appear in the budget in the order of their likelihood.

  • A global taxation study conducted by accounting firm association UHY Haines Norton notes that Australia compares unfavourably to New Zealand in terms of employment taxes – based on the organisation’s analysis, compulsory on-costs such as payroll taxes, superannuation and compensation premiums make up 15% of gross salary costs in Australia as compared to 4.5% in New Zealand.

  • China’s Finance Minister has criticised the restrictiveness of the country’s labour laws, saying that increases in wages without requisite productivity gains and the difficulty of firing non-performing workers was leading to employment heading to lower cost nations.

  • The European Commission has proposed that workers posted from a low cost to a high cost nation within Europe should be entitled to the same pay as employees in the destination country and not the the departure country. “From now on, all the rules on remuneration that are applied generally to local workers will also have to be granted to posted workers,” the Commission said. To become law, the proposal requires majority support from EU governments and the backing of the European Parliament.

Board Governance

  • The Financial Services Council and Australian Council of Superannuation Investors have launched an updated ESG (environmental, social and corporate governance) guide for Australian companies, outlining a framework to disclose the information to shareholders. The original guide was created in 2011. “We have developed the ESG reporting guide for Australian companies to help them disclose any ESG risks in a consistent way so investors and analysts will have better information to help them make measured investment decisions,” CEO of the Financial Services Council Sally Loane said.

  • At the recent AICD summit, AICD Chief Executive John Brogden and ANZ Chair David Gonski advocated a new focus on long term goals for Boards, asking them to say no to the short term fixation of some shareholders. ASIC Chairman Greg Medcraft meanwhile warned Boards that the “bad apples” defence would no longer be considered valid, so they should focus on improving company culture.

  • The AICD has released its annual Directions survey, which canvasses the views of over 300 Australian Directors on a variety of topics. The two topics the respondents believed the Board should be spending more time on were understanding IT risks and fostering innovation, while financial reporting and audit was still identified as the most time consuming task. The greatest areas for concern of the Board were maintaining a focus on strategy, properly assessing and identifying opportunities and the capacity of the organisation to adapt. The greatest challenges to Directors fulfilling their role were “group think”, the demands of compliance oversight and keeping abreast of the business environment. The greatest inhibitors to growth in the organisation were considered to be a lack of capital to invest, aversion to risk taking and management’s short-termism. Other results of the survey examined succession planning, digital disruption and culture.

Research, reports and surveys

  • AMP Capital has released its 2015 report summarising issues it encountered during the reporting year. In the preamble, it states that CEO pay should reflect the value of the executive to the organisation and not how much their peers are being paid. After analysing pay data, it found that over 50% of CEOs were being paid more than twice the pay of the next highest executive. It questioned this premium, especially as it varied considerably from sector to sector. It also noted its support of gender diversity on the Board. AMP Capital summarised its voting results for the season, noting that it had voted this season against remuneration reports where there were overly generous retention benefits, low performance hurdles, retrospectively changing performance hurdles or start dates, the use of Board discretion to vest incentives where hurdles have not been met, overly complex remuneration structures, and Boards’ unlimited discretion to allow incentives to vest on termination.

  • Wall Street bonuses have fallen for the second year in a row, according to data released by the New York State Comptroller. The average bonus paid in the securities industry fell 9% to US$146,200 last year, while the overall bonus pool fell 6% to US$25 billion. 2016 was also likely to be a difficult year, according to the Comptroller, which has estimated that bonus pools for employees working in the finance industry will drop by 2.5%.

  • Heidrick & Struggles and the Rock Center for Corporate Governance at Stanford University surveyed 107 CEOs and directors of Fortune 500 companies. The survey covered a broad range of incentive matters.

    It found that Directors attributed 40% of a company’s results to the CEO’s performance, noting that this explained the willingness of Directors to pay a premium for the right CEO. 76% of CEOs and Directors believed that CEOS were paid correctly based on the expected value of awards at the time of grant and they also overwhelmingly believed that CEO pay is aligned to performance.

    The survey compared Director and CEO opinions on CEO to that of the American public, finding that while the majority of the public thought there was a problem with CEO pay, the opposite was true for CEOs and Directors.

    To read more, the survey can be found here.

  • A recent ISS study into US CEO pay found that CEOs whose Board was headed by an independent Chairman were paid 20% less than their peers. Further results of the survey are detailed here.

  • A survey by Korn Ferry Hay Group into executive satisfaction found 47% of respondents valued “workplace relationships with co-workers and clients”, 21% named “company culture/values” as a factor and 18% valued growth opportunities. Only 4% mentioned pay. When naming frustrations, the order was turned around, with lack of growth opportunities noted as a frustration by 61% of executives, followed by relationship with management, not fitting into the company culture/values. Pay was again lowest on the list.

Gender pay

  • Curtin University has released a detailed report using data from the Workplace Gender Equality Agency, which collects data from 12,000 employers on 4 million workers. The report had a number of findings including that full-time women KMP earn $100,000 per annum less than male KMPs, with the gap growing as seniority increases. Men are more likely to receive a higher level of extras such as bonuses in addition to their salary than women. Interestingly, the pay gap is less likely to be marked if the woman works in a male dominated industry. It is also less prominent for organisations with equal gender representation on Boards. Over time, the difference in salaries leads to $600,000 in lost earnings for women. The report can be downloaded here.

  • Advocates believe that removing pay secrecy will reduce the gender pay gap. Submissions closed last month on a Greens-initiated Senate Bill that allow workers to discuss their pay if they chose to, without risking a breach of gag clauses that may be written into their contract. Employer groups do not support the Bill.

  • Australian organisations are voluntarily addressing gender inequities. Aurizon has introduced a scheme where mothers can stay at home for six months on half pay, then be paid 150% of their pay for six months while their partner takes leave to look after the child for six months. REA Group meanwhile has introduced a scheme where mothers receive six months paid maternity leave and partners receive three months.The company will also pay superannuation for the entire period of leave, paid and unpaid, for up to 12 months.

  • Glassdoor has released a global survey of 8,254 adults in Canada, Switzerland, Germany, France, Netherlands, United Kingdom and the United States, which found that seven out of ten employees believed pay was equal at their organisation. Three out of five said they would not work at an organisation where a pay gap existed.

  • The UK has released draft regulations to implement its proposed gender pay disclosure rule, where organisations with over 250 employees would need to calculate and publicly disclose their pay gap by April 2018 on an annual basis. Employers must disclose:

    1. The mean and median pay gap
    2. The mean bonus gap
    3. The proportion of men and women receiving bonuses
    4. The proportion of men and women in each pay quartile


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