The Australian Securities and Investments Commission (ASIC) has called for companies to provide more clarity on remuneration arrangements for their directors and executives.
ASIC deputy chairman Belinda Gibson (pictured) said the review was conducted as a ‘health check’ on market practices in remuneration reporting.
According to Gibson, companies can improve disclosure to shareholders in a number of areas, including disclosing the policy on the nature and amount of remuneration of key management personnel, and the non-financial performance conditions in short-term incentive plans.
ASIC also recommended that companies specify why performance conditions have been chosen, and set out the terms and conditions of incentive plans.
The advice was based on a review of 60 remuneration reports for listed companies for the year ended 30 June 2010.
Under Section 300A of the Corporations Act, listed companies must include these details in the Remuneration Report section of the director’s report for the financial year.
The reason for disclosure requirements is to place shareholders in a position where they can understand the nature of the remuneration. As outlined in the Explanatory Memorandum to the Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure Bill 2004, this includes any performance hurdles or contingencies on which the payment is based.
Proper disclosure also limits the element of surprise in the event of a payment being made, the memorandum explains.
