17. August 2010 11:38
In a submission to the Corporations and Markets Advisory Committee (CAMAC), the Chartered Secretaries Association has argued that it is neither feasible nor practical for legislation to determine one of the thorniest elements of executive remuneration— incentive components.
"A centralised, regulated approach for setting remuneration will deprive companies of the ability to respond most effectively to the needs of the day, and almost certainly will drive inefficiencies and unwanted outcomes", said Peter Turnbull, President of the Association.
The CSA believes that directors should ultimately retain responsibility for these key decisions, balanced by accountability and transparent and clear disclosure. The recommendations include:
- removing the requirement that directors report to shareholders on remuneration using defined terms from the accounting standards;
- mandating that reporting include actual pay received during the year, including base salary and both short and long-term incentives;
- mandating separate reporting of deferred payments relating to those incentives by stating the maximum number of securities (rather than their value) that may be received, and anticipating the number of securities that will be received based on current performance; and
- mandating a two-tier approach to reporting perfomance against short-term incentive targets, which would require (a) disclosure of the general nature of the targets' components, and (to the extent not prejudicial to the company) (b) the specific targets relating to those incentive targets.
Submissions on CAMAC's executive remuneration information paper closed on Friday 13 August.