The amount of shareholder money used for annual bonuses to chief executives more than doubled between 2002 and 2007, according to the Australian Council of Superannuation Investors (ACSI).
“The increased number of CEOs receiving larger short term incentives… also coincided with increased shareholder scrutiny over the terms of equity grants made to CEOs,” ACSI said of the Top 100 Australian listed companies.
When it came to annual bonuses, reporting rigour was a large issue for shareholders, ACSI said.
“When assessing annual bonuses, most companies only provide general comments about the types of measures used in assessing requirements, despite the requirements of the Corporations Act for them to provide a detailed summary of hurdles to all aspects of performance pay,” ACSI said.
“Annual bonuses… should be linked to clear key performance requirements and targets, and that where commercial confidentiality applies to performance objectives and targets, shareholders should be informed of the parameters adopted.”
Some companies’ remuneration reports to shareholders are still too complicated, meaning their boards have lost the ability to clearly explain the nexus between pay and performance, ACSI said.
In the report, ACSI suggested all share incentives to key management personnel be approved in advance by shareholders, and that any payments (greater than 12 months fixed pay) made on cessation of employment should also get shareholder approval.
