It is likely more companies will look to put a greater onus on aligning executive performance with the long-term sustainability of businesses, Australian financial services associations have told InvestorDaily.
Comments come on the back of Suncorp’s decision last week to make new chief executive Patrick Snowball, who commences the role on 1 September 2009, to purchase $500,000 worth of Suncorp shares at his own expense.
“It is early days to say whether more companies will opt to go down the same path as Suncorp, but in light of the global financial crisis and a greater focus on executive and long-term company performance, it’s likely that a number of boards will look at Suncorp’s decision closely,” Association of Superannuation Funds of Australia (ASFA) chief executive Pauline Vamos said.
“Particularly in terms of public companies, there has been an expectation for the chief executive to have skin in the game, but the key will be ensuring that any skin in the game is focused on long-term results and the long-term sustainability of a business.”
With Australians’ superannuation heavily invested in Australian businesses, investors will be happy to see Suncorp’s change in attitude and that it is aligning the company’s long-term results with the vested interests of its chief executive, Vamos said.
Australian Shareholders Association chief executive Stuart Wilson said in the case of Suncorp, the decision to make the company’s chief executive buy shares was one a good one.
“An incoming chief executive purchasing a meaningful amount of shares could only be seen as a sign of commitment to the company and its shareholders,” Wilson said.
“At the same time, however, I don’t think it should be mandatory that chief executives have to purchase shares in their company as I don’t think shareholders would like to see good leaders potentially scared off from taking the executive position due to an onerous requirement to purchase shares.”
It should be encouraged on a case by case basis, Wilson said.
