Remuneration reports are “unduly complex, place a significant burden on companies and are of limited use to shareholders and other readers. At worst, they have become almost incomprehensible to even expert readers and can give a distorted picture of executive remuneration.” So says the Australian Institute of Company Directors (ACID). Instead ACID wants the reports to be more “shareholder friendly” and focus on the remuneration actually received by senior executives.
Under an overhaul of the Corporations Act being proposed by ACID, the simplified remuneration reports would clearly distinguish between what executives have earned in the current year and their future remuneration entitlements, like bonuses and share allocations. There would be an explicit requirement in the Corporations Act for companies to spell out for shareholders the governance structures they have in place to determine remuneration and probability-based accounting valuations of current entitlements to future benefits like shares or options would go.
Shareholders are unlikely to welcome any watering down of disclosures that would enable them to estimate the value of total future awards. However AICD spokesperson Steve Burrell said that: ”From our point of view, there is not much point in having estimates which are like pin the tail on the donkey in terms of their accuracy. . . it’s much better to focus on what people are actually being paid.”
In May this year the Corporations and Markets Advisory Committee was charged with reviewing current remuneration reporting standards and has been asked to report its findings to the Hon Chris Bowen MP, Minister for Financial Services by November. ACID’s proposals will form the basis of its repsonse to CAMAC.