BOARD AND EXECUTIVE REMUNERATION GOVERNANCE
Remuneration Governance Processes
The Corporations Act 2001 places obligations on the boards of listed companies to ensure that their remuneration decisions are made in a responsible and ethical manner. Many private and government owned entities follow the practices set out in the Act and ASX Principle 8, Remuneration Fairly and Responsibly.
Underling Principles (adapted from ASX Principle 8):
One
There is a need to balance levels of reward to enable attraction and retention of capable directors and executives.
Two
STI and LTI Plans should support and reward corporate and individual performance without compromising the organisation’s approach to risk.
Three
Equity-based incentives for non-executive directors should be designed so as not compromise their independence.
Four
The need to exercise sound judgment and a level of restraint such as not to fuel the market and be viewed as excessive by key stakeholder groups.
“The role of an effective board is to balance the interests of all stakeholders, add value for shareholders and ensure that the corporation has a net positive impact on the communities and environments in which it operates.”
— Governance Update, January 2020
“A listed entity should have a rigorous and transparent process for developing its remuneration policy and for fixing the remuneration packages of directors and senior executives. That process should include benchmarking the remuneration of directors and senior executives to that paid by the entity’s peers to verify that it is not excessive.
No individual director or senior executive should be involved in deciding their own remuneration.”
ASX Governance Principles and Recommendations 2019 Page 45
If your board or remuneration committee needs assistance with remuneration governance contact Geoff: gtnunn@gna.net.au