Monday, 17 October 2011

Companies to face revolt over pay rises

Companies to face revolt over pay rises

abc
business editor, On Monday 17 October 2011, 10:40 EST
Shareholders in Australia now have new powers to oppose what they see as excessive pay increases for senior executives.
The first sign of the new regime may be seen when the annual general meeting (AGM) season kicks off this week.
Under new laws, company directors have to face re-election if more than 25 per cent of shareholders reject a remuneration report for two years in a row.
This new power came after some large parachutes for executives who failed to keep shareholders happy; former Telstra CEO Sol Trujillo left the telco with $30 million in entitlements.
Now both retail and institutional shareholders will have real powers to punish boards who misjudge public and investor sentiment, by vetoing a remuneration report.
Until now, such votes have not been binding.
Vas Kolesnikoff, chief executive of the Australian Shareholders' Association, says it is a brand new day for corporate accountability.
"Things are now a bit more serious, in that no one really wants the board to be spilt and the directors really don't want to be in that position either," Mr Kolesnikoff said.
Mr Kolesnikoff says this increases the pressure on boards and companies to ensure that any remuneration rises will not be subjected to the new tangible powers.
"What it does also mean is that the directors now have to pay more attention to what the shareholders are saying," he said.
"I think in the current market situation there is greater pressure on putting forward remuneration reports for CEOs and executives that are more, shall I say, reasonable and more aligned with the results of companies.
"You just can't keep on paying executives more and more when the shareholders are just not achieving their results." At tomorrow's Telstra AGM shareholders will vote on whether to accept the Federal Government's $11 billion compensation package for giving up its fixed-line copper network to ensure the dominance of the NBN.
This is seen as a done deal, but pay rises for executives of a poorly performing company such as Telstra will attract shareholder comment.
Qantas also will take flak from shareholders at its AGM on October 28, amid falls in its share price and ongoing industrial disputes.
Wesfarmers, Leighton Holdings and QR National also are likely to feel the anger of shareholders, especially given current market conditions.

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