Executive pay will be under the spotlight for this year’s annual general meeting (AGM) season in a bid to align remuneration and long-term corporate performance, the Australian Council of Superannuation Investors (ACSI) has warned.
ACSI has released new governance guidelines ahead of the 2013 annual general meeting (AGM) season, including a number of new benchmarks that will inform voting recommendations.
It has highlighted the issues it believes to be most contentious: bonuses linked to acquisitions as opposed to shareholder value, fixed pay increases to compensate for pay freezes, and figures that protect executive incentive plans from costs incurred by the company, to name just a few.
“The use of normalised and adjusted earnings in bonus plans will be in the spotlight this reporting season,” said ACSI chief executive Ann Byrne.
“Of particular concern are companies that exclude costs and impairments from bonus calculations.
“An impairment charge should not be excluded from the bonus calculations for the CEO and executive team which acquired the asset that has been impaired.
“Termination and retirement payments are also back on the radar – this is a concerning trend and we want boards to know the benchmark is one year’s salary.”
The guidelines, which were updated in July, now include commentary on issues considered when directors seek election and re-election to company boards, such as the company’s performance, length of tenure, performance on other boards and their capacity and workload.
Companies with ongoing strategy issues will receive particular attention, ACSI said.
In light of the apparent success of the two-strike rule, ACSI said it expected to see a number of companies engaging with shareholders on issues of concern.
The role of boards in raising capital would also continued to be monitored, particularly in relation to risk.
