Remuneration report resolutions - An overview

One of the changes introduced as part of the then Howard Government's corporate law reforms, commonly known as CLERP 9, was the introduction of a non-binding resolution on executive remuneration to be put forward to shareholders at each year's AGM. The new rules regarding executive remuneration, similar to ones previously introduced in the UK in 2002 and soon to be introduced into the US by the Obama Administration, came into effect in mid-2004, affecting AGMs from mid-2005 onwards.

The non-binding nature of the resolutions was both important and key to their success. As these reports present what has already happened and not a proposal for future executive pay, it is not feasible to allow shareholders a binding vote (as has been suggested by opposition leader Malcolm Turnbull). Nor does voting it down actually put forward any alternative proposals. But what it does do is act as a measure of shareholder approval, and means that even a strong minority vote against it can send a strong signal to the board.

It also appears that shareholders have not abused the resolutions. In the 5 years since it was implemented, only 7 times has a remuneration report failed to receive a 50% for vote. These companies were: Novogen, Telstra, AGL, Valad Property Group, Transurban, Boral and Wesfarmers. Over the next week or two I'm hoping to take a closer look at each of these individual cases.

For some extra reading on the issue, take a look at "The biggest votes against remuneration reports" by the Mayne Report and "Calls for Canberra to rein in executive pay packets" by the 7.30 Report.

The only finance report worth watching

The short answer is Alan Kohler on the ABC. Read on for the long answer:

As a child I used to watch A Current Affair, with its stories on saving money on the groceries, dodgy builders and weight loss miracles, and just assumed that this is what current affairs was about. Then I began watching the 7.30 Report and realised what a real current affairs show was like.

The same thing happened with finance reports. The usual nightly news finance report was the presenter reading off the changes of the All Ordinaries, some share prices, exchange rates and commodities like gold or oil compared to their price the day before. Often they gave a reason like "the RBA cut interest rates" or "Telstra reported lower than expected earnings". The problem was, for the average person this meant little or nothing, and for the sophisticated investor it was too little information.

Then came Alan Kohler. His success was in being able to explain why things happened, in a way that both the ordinary person and the sophisticated investor both understood. And he looks at the longer term trends, rather than just the day to day movements, so that each night you walk away learning something new.

Check it out for yourself: Monday to Friday at around 7:15PM on ABC1 or in "Featured Media - Finance Report" on the right rail of the ABC Business News.