LTIs have a poor reputation as overly complex, legalistic, opaque and challenging, with unintuitive performance metrics. But LTI/LTVR can, and should be, the most powerful, effective element of remuneration. So what are the fundamentals of LTI plans and their critical success and failure factors?
Substantial regulatory changes and innovative solutions have recently made compelling LTVR/LTI structures possible for unlisted companies. We analyse the four main approaches we observe in successful unlisted market examples (and the main alternative).
In February, damning WGEA findings laid bare the problematic and oversimplified collection, analysis and reporting of gender pay gap data. This can be remedied for genuine insights and effective action plans to impel true gender equality in remuneration. GRG offers practical support for this long overdue outcome.
SVEs represent an attractive simple element of remuneration for executives that can be introduced for no additional cost. They can also help address deficiencies with STVR and LTVR that are problems for some companies.
KMP remuneration disclosures in remuneration reports are required under the Corporations Act. However in recent years the number of executive roles reported has declined, in an apparent move away from transparent communication to minimalist compliance – perhaps to reduce exposure to criticism. We canvass the change in disclosure, its impact for boards seeking to benchmark remuneration, and explore the path to improved databases.
SIPs may at first glance seem to offer less complexity and more certainty than commonly accepted STI and LTI plans, but they are actually more complex and lead to lower payments for executives who achieve target performance.
There is now a need to seek alternative sources of current remuneration data beyond the ‘disclosed’ to include the ever-growing population of non-disclosed executive data. We compare the five main approaches to populating remuneration databases in which client companies can have a high level of confidence.
High-potential, cash-limited ASX listed companies need to efficiently compete for talent at all employee levels without the ESOP start-up tax concessions available to unlisted companies. A tax-efficient, cost-effective alternative is granting Premium Exercise Priced Options (PEPOs).
In 2022, hastily drafted amendments to the Corporations Act tried to address long-standing problems with the regulation of Employee Share Schemes (ESS). The new Division 1A of Part 7.12 only partly succeeded. After lobbying by GRG and others, substantial changes were made. This insight provides a summary of the final framework and key outcomes, actions and issues.
Boards are always in a conflicted position with remuneration. NEDs are both the decision makers and the beneficiaries of those decisions, while they must consider good governance and their legal obligations. This Insight discusses why boards must receive fee recommendations from an independent remuneration consultant.