While calls in the US for executive wage restraint reverberate around the world, Chartered Secretaries Australia is conducting this survey to gain valuable insight into how boards in Australia are responding to similar stakeholder sentiments.

We are keen to explore what models or strategies boards in Australia are pursing in order to retain performing executives in a difficult market and reward behaviours and performance that produce outstanding results for the company, yet at the same time manage an unprecedented backlash from shareholders over the slide in value of the stock market in recent months.

1. Up until the global financial crisis, did your board have a good sense of awareness of executive remuneration issues?

a) Yes 92%
b) No 8%

Comments:

Received advice on market remuneration and was conscious of shareholder sentiment.
Below average remuneration.
But tide had turned about on what's now acceptable to draw, and the scrutiny to which those payments and their calculation methods will be subject.
An appropriate executive remuneration structure is a significant driver in company performance.
I cannot comment as the company I work for was private until April 08 at which time there were extensive board changes.
The board had a reasonable level of interest and awareness on executive remuneration but increased regulatory focus on this area has sharpened their interest.
As the company was in the process of changing its remuneration strategy, the board and in particular the remuneration committee were well aware of issues surrounding remuneration.

2. In light of the recent market meltdown, does your board have a heightened sense of awareness of executive remuneration issues?

a) Yes 84%
b) No 16%

Comments:

Awareness heightened but will continue current practices which are regularly endorsed by members at AGMs with high 90 per cent remuneration report approval votes.
Link to performance HAS to be justified and managing shareholder expectation that bosses will share some of their pain. Anyone on a high salary will otherwise be seen as a ‘fat cat’ unless they can point to results achieved for the organisation they run.
It is ensuring alignment with the adjustment of company focus in response to the financial crisis.
An appropriate remuneration structure should of necessity reflect company performance against goals. These have obviously been affected by market conditions.
The board is looking at the issue of accountability in relation to the remuneration package both in relation to short, mid and long-term incentives. In particular the linking of performance-based payments with the long term success of the company.
Were on top of it previously.
As share prices fall the board is more conscious of shareholder concern (outrage) on executive and director remuneration.
The company engaged with proxy advisors and major institutional investors prior to the AGM.

3. If yes, how is your board showing its engagement with remuneration issues?

a) with more frequent board or remuneration committee meetings being held   28%
b) greater engagement with shareholders or proxy advisory services               17%
c) reviewing/rewriting executive contracts                                                     33%
d) reviewing or restructuring incentive plans                                                  61%
e) reviewing remuneration policy and structure                                              56%
f) request for assistance from external advisers                                             33%
g) All of the above                                                                                       17%
h) Other                                                                                                     17%

Comments:

A lot of these things have been established practice.
Greater sense of understanding of fixed remuneration compared to peers.
Remuneration was aligned to company performance and board remains very conscious of this issue.
Employees have been asked to take a cut similar to that taken by the board which has not gone down well at all, given the board has the ultimate responsibility for running the company.
The board's engagement is consistent with previous practice.
The board is very aware of the issues however believes its structures and practices are appropriate.
All of above occurred before global financial crisis.

4. Is your board and remuneration committee addressing external commentary in relation to executive remuneration (for example, from regulators and proxy advisory services) in their remuneration decision-making and policies?

a) Yes 64%
b) No 36%

Comments:

Always monitor external commentary.
The chairman of the Remuneration Committee meets major institutional shareholders and proxy advisory firms to discuss key remuneration issues at the start of the year, to help the Remuneration Committee in structuring a sound remuneration strategy and appropriate performance hurdles and incentive plans to meet shareholder expectations.
None has been made.
More so responding to shareholder opinion which reflects general public opinion than the regulators. The regulators have lost a lot of respect given the role they have played in failing to curtail the financial disaster and responding only after the fact.
First time we have been called by proxy advisory firms this AGM reporting season.
Not at this stage of our review process.
We have undertaken a full review of our policies to assess how they compare with the US and UK recommendations.
Following discussions with proxy advisors and institutional investors a clarifying statement on the remuneration report was released to the market.
Changes made to terms of variable performance-based pay based on feedback from institutional investors, ASA and proxy advisory services.

5. During the global financial crisis, have your shareholders initiated discussions with the board and remuneration committee about executive remuneration issues or met the remuneration committee?

a) Yes (if so, how?) 32%
b) No (if not, why not?) 68%

Comments:

Remuneration practices have been seen to be reasonable and without any excesses.
No issues have been raised with the board.
Management team is underpaid.
Only as per usual at the AGM.
Performance has been good and share price has outperformed.
More employees rather than shareholders who are not aware of the full range of benefits that upper management receive (ie payment of health insurance, car allowance, payment of home expenses, business class travel etc.)
Just in relation to LTI resolutions which went to AGM.
But only in the context of our AGM rather than driven by the global financial crisis per se.
Discussion with Chairman rather than Remuneration Committee. We have proactively initiated discussions.
They would do this anyway. The crisis has not affected this.
Private group.
The board initiated discussions with shareholders/proxy advisors — not the other way around.

6. Does your board and remuneration committee have a heightened awareness of aligning remuneration with performance in a way that is relevant to the market of your company and your shareholders’ expectations, and are they actively re-aligning and re-negotiating performance-based remuneration models?

a) Yes 75%
b) No 25%

Comments:

Considering viability of existing long-term incentive plans.
There has been a heavy awareness of these needs over past years and the Remuneration Committee has focused on them.
Constantly searching for relevant metrics. Past metrics have under-delivered rewards compared to peers.
Unfortunately though the employee share plan was the first casualty, not the executive bonuses or the pre-payment of executive superannuation!!
We are considering moving away from relative TSR to a more targeted performance measure.
Our policies are appropriate for the current environment.
Not at this stage of the review process.
This was done before the global financial crisis however.
Already acutely aware of this issue.
The remuneration strategy has been developed to drive shareholder value and returns. The difficulty has been in communicating this to shareholders.

7. Is the board looking to increase the emphasis in the company's executive remuneration structures with regard to?

a) STI                        32%
b) LTI                        55%
c) fixed pay               23%
d) none of the above  41%

Comments:

Believe the balance is appropriate.
Has introduced share option scheme this year. Also focus on adequacy of fixed remuneration.
Greater emphasis on linking STI and LTI outcomes to remuneration is being considered, together with the appropriate STI and LTI performance measures.
Satisfied as to where this is at present.
STIs — giving employees two weeks off over Christmas not marked on annual leave rather than cash bonuses. LTIs — employee share plan has been abandoned.
Deferral of STI. Review of LTI hurdles.
No change anticipated.
Not yet determined.
and ‘medium-term’ incentives with 2-3 year business targets, in conjunction with LTIs with 3-5 year TSR targets.
The structures have been developed to meet the specific needs of the company in light of its current projects and plans, with the aim to drive shareholder value. It has not been structured to conform with external factors/third party expectations unless they align with the company's aim to provide a satisfactory return to shareholders.

8. With the contraction in global liquidity, has there been a new focus in the key result areas (KRAs) that determine executive performance bonuses, to include capital management in KRAs?

a) Yes 33%
b) No change 67%

Comments:

Management of working capital and consequent debt levels has much greater emphasis, affecting all operational business units and finance.
Unsure. Focus on finding capital to stay operational rather than on bonuses at this stage.
No new focus as it has always been a KRA for specified executives.
Cost control — capital and operating — and balance sheet strength was already a focus.

9. Insufficient allowance for risk is often mentioned as a shortcoming of some remuneration policies. In light of the global financial crisis, has your board changed the remuneration policy to incorporate risk?

(a) Yes (if so, why?) 25%
(b) No (if not, why not?) 75%

Comments:

Was already included.
The acceptance of risk and the need for appropriate risk management are part of the business model.
Not changed yet, but may be reviewed at the next meeting.
Adherence to VARs and delegated limits now introduced as gateways to variable remuneration.
The company's executive remuneration strategy already requires 100 per cent compliance before STI is paid out. Risk is considered and focused on through a separate Board Risk Committee.
No but then unsure of precise changes to executive awards. More about conserving cash than actively using risk to discount short and long-term rewards.
Only for relevant individuals on STI scorecard.
No, risk has always been included as a KRA.
But it was already an existing element of the remuneration policy anyway.
We already had a high component of risk focus. Executives have had specific reductions in STI to reflect failure to adequately manage risk.
Risk is included as a KPI for the STIs.
The global financial crisis has not impacted the policy as the company has always incorporated risk in its remuneration policies.
Policy not amended, but risk management a key component of performance agreements.

10. Has your board included additional disclosures in your remuneration report to better explain departures in your remuneration policy and structures from market trends or commentary by governance advisory bodies?

a) Yes 39%
b) No 61%

Comments:

31/12 year end so issue hasn't arisen yet.
No but the reasons behind the measures adopted are explained.
We generally adhere to market practice.
Wherever possible, feedback from governance advisory bodies has been incorporated into the remuneration report or other accompanying disclosures (eg. corporate governance statement).
Not required to do so.
But will be looking to do so in next year's annual report.
Continuously updated.
There has not been a remuneration report in the last two months since the downturn.
But could have done it better.