Get valuable insights into KMP remuneration

At GRG, we can help you navigate the complexities of KMP remuneration. Our complimentary Remuneration Insights share the thoughts of some of Australia’s leading KMP remuneration consultants using our extensive Australian KMP remuneration database.

Remuneration Benchmarking and Advice

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For some years ASX listed companies have been in a privileged position of having access to publicly disclosed remuneration data for KMP roles. However, using this data can be a burden so most companies rely on consultants such as GRG which have proprietary databases. However, not all KMP databases are equal. It is important to understand the differences so that you can have confidence in the data.

Rights Plans Better than Share Purchase Loan Plans

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Share Purchase Loan Plan (SPLPs) are often believed to be more tax efficient for executives than Rights Plans, because SPLP share price gains are generally 50% capital gains tax free whereas Rights are 100% taxed under the employee share scheme (ESS) taxing provisions. We debunk that commonly held belief.

Remuneration and Financial Crisis Management

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No business will be immune from the adverse effects of COVID-19 beyond the short term. Lessons from the Global Financial Crisis, as well as innovations since, can be drawn upon. We explore the key governance and practical issues for remuneration to be considered by boards and executives in times of tight cash flow. There is even a golden wealth creation opportunity for those with a modern rights plan.

Enforcing “Skin-in-the-Game”

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Properly weighted LTVR plans can facilitate longer term holding of equity interests by executives, but most are structured to neither assist nor compel executives to retain the equity earned. We examine practical optimisations of LTVR plans to achieve more “skin-in-the-game” for senior executives.

Unlocking the Secret to Long Term Alignment

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Executives retaining large equity holdings in their employers promotes genuine long term alignment. However the many obstacles to this encourage the disposal of equity as soon as it vests to pay down an unnecessary tax liability, exposing them to ASIC scrutiny. We identify the obstacles and offer practical solutions for long term equity holding by KMP.

Rethinking Executive Reward

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Co-written with the KBA Consulting Group, this important Insight offers an in-depth overview of executive reward. In many vital respects, the current paradigm fails both shareholders and executives, as creating shareholder wealth is often confused with maximising short-term profits. The economic interests of executives need greater alignment with the long-term best interests of their company, its shareholders and its many other legitimate stakeholders. We look at SIP, with Wesfarmers as a case study, and explore better alternatives.

Retirement Savings – The Weak Element of Executive Remuneration

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For all employees and particularly executives, superannuation fails to meet retirement saving needs and no other element of remuneration focuses on this need. Retirement savings is the weak element of executive remuneration and is such a critical issue for most executives that it should no longer be ignored.

New Employee Share Scheme Taxing Provisions Released

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On 14 January 2015 Treasury released for public comment drafts of proposed amendments and explanatory materials related to previously announced changes to the employee share scheme (ESS) taxing provisions. Submissions in relation to the proposed changes may be submitted until 6 February 2015. As the amendments are intended to come into effect on 1 July 2015 it may be anticipated that the amendments will be finalised and submitted to Parliament to be passed before the end of June 2015.

Short Term Incentive Fundamentals

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The level of understanding of when an STI should be used and how its design features should be constructed seem not to be well understood by many stakeholders. Here we seek to provide clarity as to the fundamentals of STI plans. The market practice information quoted has been extracted from the 2014 GRG Incentives Guide.

Major Changes to the Remuneration Landscape

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There are a number of significant changes occurring in the key management personnel (KMP) remuneration space that remuneration committee members, remuneration professionals and company secretaries should be aware of, as the changes are expected to influence the way executive and director remuneration is designed, governed and communicated.

Board Discretion on LTI Vesting

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In light of the decision by the Board of BHP Billiton to reduce the level of vesting in relation to the 2008 long term incentive (LTI) grants that had a measurement period ending in 2013, this issue discusses the critical questions that need to be considered in relation to the exercising of Board discretion related to vesting of LTI grants.

A Value-based Perspective on Executive Incentive Plan Design

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Shareholder value is created when management either delivers performance in excess of market expectations, and/or when it convinces the capital markets that it has put a strategy in place that will enable it to do so. The article discusses the application of this simple tenet of finance in the context of setting goals and establishing business performance measurement systems particularly when designing executive reward plans.

Change in Control Provisions Need Review

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A change in control (CIC) event is often not well addressed in executive KMP employment contracts and plans rules for short term incentive (STI) and long term incentive (LTI) plans. For many companies there is a strong need to review CIC event provisions. Such reviews should be undertaken well before a CIC event is likely to occur.

Treating “Good Leavers” Badly

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One of the surprising findings from research reported in the 2013 GRG KMP Incentives Guide is that most companies appear to be exposing executive KMP who are “good leavers” to reduced benefits on cessation of employment including reduced STI payouts and lower or nil vesting of LTI grants. This issue needs urgent attention.

Company Aligned New Incentives

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In December 2012 Blackrock released a paper titled 'Time to Rethink Executive Incentive Programs'. It was critical of many incentive plans being used for executives who are KMP, and suggested that companies were not designing incentive plans to suit their specific circumstances. This paper discusses three companies, namely Macquarie Group, Seek and Tatts Group, that have or are considering adopting different approaches to KMP incentive remuneration.

Clawback of Overpaid KMP Remuneration

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Released in December 2012, 'Corporations Amendments – Improving Disclosure Requirements' recommended a clawback of remuneration overpaid to key management personnel (KMP). The topic remains relevant due to many companies already having introduced clawback policies.

Remuneration Profile Review

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Remuneration profiles reflect the proportions of remuneration that are expected to arise for different elements of remuneration at different levels of performance. These proportions may vary for different categories of employees. We canvass the main types of Remuneration Profiles and discuss when they may be relevant.

TSR Assessment for LTI Purposes

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Boards have great difficulty in selecting the approach to be applied to assessing TSR performance. It is important for the TSR assessment approach selected to be directly aligned with shareholder/investor expectations so that vesting can be calibrated to those expectations. In the Remuneration Report the vesting of LTI grants and company performance should be shown to be in alignment.

PEPOs Unexpectedly Face FBT

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The Australian Taxation Office ATO has recently released an interpretation of the taxing laws which accepts that such PEPOs have a no taxable value for ESS taxing purposes but maintains that they are not exempt from fringe benefits tax (FBT) and have an FBT taxable value for which companies are liable for FBT.