Executive Summary
The new Corporations Act requirements for a remuneration report and a non-binding shareholder vote (part of the CLERP 9 amendments) come into force for the reporting year on or after 1 July 2004. Boards need to (re)consider remuneration policies and structure now, as these will be subject to the new reporting requirements. The format of the remuneration report will require careful consideration to ensure it meets legislative requirements, has appropriate transparency, promotes shareholder understanding and is defensible. The approach of the board at the annual general meeting (AGM) to the non-binding shareholder resolution concerning the remuneration report should be planned in advance. This will include consideration of the following issues:
- The AGM agenda and the form of resolution
- Whether amendments to the resolution will be accepted
- Proxies
- Conflicts of interest
- Pre-AGM shareholder questions and discussions
- Show of hands versus a poll at the AGM
- The board's response should the resolution not be approved
If the resolution is not approved, the board may:
1. Accept or partially accept the vote, which may mean a review of the remuneration policies, structure and packages;
or
2. Not accept the vote and explain why it believes the remuneration policies and packages are appropriate. Whether or not the resolution is approved, director and senior executive remuneration will require a heightened "issues management" approach by boards.
Full paper available in PDF download.