The Agenda – October

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Contents

Superannuation

Response to FSI ReportSuperannuation Remuneration Disclosures

The Federal Government’s response to the Financial Systems Inquiry, which was released on October the 20th, includes a proposal to improve the efficiency and operation of the superannuation system.

The Government will enshrine the objective of the superannuation system in legislation in order to align policy settings, industry initiatives and community expectations.The Government also proposes to develop legislation to allow trustees of funds to provide pre-selected retirement income products to help guide members at retirement and improve outcomes for retirees.

The Productivity Commission will be tasked with developing and releasing criteria to assess the efficiency and competitiveness of the current system, and develop alternative models for allocating default contributions.

Beyond 2016, the Government will implement legislation to introduce director penalties.

ASIC Survey of Super Websites

ASIC recently surveyed superannuation websites to check industry compliance with the new transparency disclosure requirements introduced as part of the Stronger Super reforms. The reforms, which commenced on 1 July 2013, included a requirement for details of executive remuneration and other information to be publicly accessible on super fund websites.

“Our survey indicated that superannuation trustees generally seem to have understood what was intended with these transparency reforms and have made a good effort to comply. The required information has been presented in a variety of ways,” said ASIC Commissioner Greg Tanzer. However, Mr Tanzer noted that there were “pockets of non-compliant trustees who appear to have struggled with the new requirements”.

ASIC states that public offer superannuation funds can make the following simple changes to their websites to improve transparency:

  • Make transparency information easier to find on the homepage.
  • Insert hyperlinks to transparency information in one place or publish the information itself in a dedicated part of the website.
  • Disclose the periods that executive officers have served as board members.
  • Only disclose a director’s remuneration as nil if their services are purely voluntary.
  • Include voting summaries on international listed shares.
  • Disclose that there is no voting summary where the trustee’s policy is not to vote on listed shares.
  • Consider including an overview of voting summaries, which may involve sorting by overall resolution type and using simple graphics (e.g. pie charts)

Executive Pay

Disclosure Requirements

PricewaterhouseCoopers has indicated that there needs to be a discussion about alternative disclosure requirements for executive remuneration.

PwC is currently lobbying Treasury to change the reporting requirements, stating that the current rules do not provide an accurate picture of what executives are really earning. Key areas of concern include disclosure obligations relating to the key measures governing executive pay and accounting policies for share-based payments.

PwC partner Margot Le Bars says that substantial regulatory change would require consensus from a diverse group of stakeholders including proxy advisors, shareholder groups, company directors and senior executives, government, accountancy firms, as well as business interest groups, such as the Business Council of Australia.
You can read more here.

US SEC Pay Ratio

US companies are urging the House Financial Service s Committee to pass an Act which repeals the recently finalised US Securities and Exchange Commission CEO pay-ratio rule. The rule, which was adopted by the SEC in August, requires a public company to disclose the ratio of the compensation of the CEO to the median compensation of its employees.

Leading organisations including WorldatWork believe that a full repeal is the best solution to what is expected to be an “extraordinarily expensive, time consuming and burdensome (process) for companies” and have stated that the rule would not result in any meaningful benefit for shareholders and potential investors.

Workforce

Some employers are choosing to replace annual staff satisfaction surveys with more regular reviews and are utilising social media analytics to find out how staff really feel. Companies state that benefits include:

  • Access to real-time employee engagement data
  • Managers no longer need to wait weeks for reports
  • Industry-specific language can be used to extract information
  • Greater focus on key drivers around retention
  • High performing employees are becoming more engaged

There has also been a move toward systems that provide employees with regular feedback on performance, as opposed to the traditional once-a-year performance review. “The argument for never-ending reviews is that they offer a more accurate picture of how an employee is performing”, writes Rebecca Greenfield in an article for the Sydney Morning Herald.

Performance review tools facilitate this process by allowing employees to leave real-time messages about colleagues’ accomplishments. Examples are Reflektive, which Pinterest and Instacart use, and the Anytime Feedback Tool utilised by Amazon.com.

So far, companies that have chosen to abandon the annual performance review process include MYOB, National Australia Bank, Deloitte, Accenture and Seek.

Pay Equity

There is continued discussion in the media around pay equity in Australia, with new global research undertaken by the Hay Group showing that the “gender pay gap” is gradually closing, although women in senior roles are still paid less. The study found that, for instance, 17% of senior management and executive roles in “pay premium” industries such as mining, utilities and industrial manufacturing are occupied by women.

The research revealed that gender inequality is driven by two key issues: the first is that there is not equal pay for work of equal value, and the other being the ratio of men to women in high paying positions.

Ernst & Young (EY) is one such organisation, revealing in September that its “gender pay gap” is 1.8% and admitting that women are being paid less than men for doing the same job. CEO Tony Johnson cites unconscious bias as the reason behind this: “We’re still trying to get to the bottom of why males exhibiting the same competency as females are being awarded a higher rating” Mr Johnson said. At EY, salary increases are dictated by ratings, whereby a higher rating means a larger pay increase.

PricewaterhouseCoopers (PwC) has also disclosed a pay gap, although it found that 9% of the 11.4% gap is attributable to the fact it hires more men than women. When this factor is excluded, the gap is 2.4%, which CEO Luke Sayers explains is due to the fact that “men tend to be disproportionately employed in the higher paying roles”.

The issue of how to better support women to attain senior leadership roles was the subject of a recent roundtable convened by newly appointed Minister for Women and Employment, Senator the Hon Michaelia Cash and President of Chief Executive Women (CEW), Diane Smith-Gander.

“Gender diversity in senior leadership results in more representative decision-making and enhances an organisation’s ability to deliver value to its clients. This holds true across both business and Government” Minister Cash said.

Recent government initiatives include:

  • Committing $100,000 to help fund CEW scholarships and fellowships to support women’s participation and leadership in Science, Technology, Engineering and Mathematics (STEM) industries
  • New BoardLinks Champions to help increase the number of women in leadership positions
  • Release of the Gender Balance on Australian Government Boards Report 2014-15, which provides a snapshot of progress in meeting the gender diversity target.

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