A1 Executive Remuneration Simon Pordage Michael Robinson 2011 ANNUAL CONFERENCE 28 TH ANNUAL CONFERENCE 2011

Executive Remuneration Simon Pordage FCIS Company Secretary, Australian Foundation Investment Company Limited Chairman, Legislation Review Committee, CSA 2011 ANNUAL CONFERENCE 28 TH ANNUAL CONFERENCE 2011

Executive Remuneration –Practical Insights Experience as Company Secretary of a listed company that is itself an institutional investor –“Air time” received by Executive Remuneration shows no signs of abating Some companies “winning” with shareholders Generally seem to be “losing” the public debate –“2 strikes” is now enshrined, developments overseas could pressure for more change here

Disclosure Compliance v Transparency –What is your aim in preparing the Remuneration Report? –Yes, Corporations Act and Accounting Standards can make it difficult for disclosure to be effective –Consider additional concise information to aid transparency – at front of the Report

Disclosure (cont.) Compliance v Transparency (cont.) –Put yourself in the position of a shareholder what would they expect? –If your Board has exercised a discretion relating to remuneration – explain why

Communication –Think about Communications post or with Annual Report If you prepare a non-statutory annual review, do you mention remuneration in it? What about the vast % of shareholders who don’t get the Annual Report in hard copy? –Engage early After Notice of Meeting far too late Must be in developmental stage before final decisions taken

Communication (cont.) –Understand your share register Recognise different shareholders have different views & opinions Engage with major shareholders and their representative groups Overlook retail shareholders at your peril –Regardless of % of shareholding –Other Stakeholder Groups Media (post Annual Report publication) Employee representatives

Communication (cont.) –At the meeting (AGM or other) Prepare, Prepare, Prepare!!!! Must be able to articulate remuneration rationale concisely and clearly Ensure you believe in your approach, don’t follow others, it shows….

2011 CSA Conference Executive Remuneration And Stakeholder Engagement ©Guerdon Associates Pty Ltd ABN This document is private and confidential. It is provided for the sole use of CSA Annual Conference attendees. Michael Robinson 5 December 2011

10 Remuneration voting Companies with 25% or more “no” votes on the remuneration report +30% on prior But not many “repeat” offenders

Outlook There will be 2 nd strikes – it takes 18 months to amend and report on a new remuneration policy But key proxy adviser market more fragmented, with services provided by ACSI, ISS, CGI Glass Lewis, Manifest (via SIRIS), and Ownership Matters

12 Pay review process External pay advice on KMP? Company, not guidelines, should drive the process Build consensus, not alienation Content of review should include pay levels, pay mix, pay vehicles, performance measures, performance calibration Test viable alternatives