In 2019, 魅影直播 conducted a targeted review of board oversight of variable remuneration schemes. The review covered 21 ASX listed companies across seven industry sectors and collectively representing $738 billion in market capitalisation (as at 10 June 2020).
The review was designed, among other things, to:
- identify聽鈥榞ood鈥� and 鈥榩oor鈥� practices in making decisions about variable remuneration;
- raise governance standards to make executives more accountable for their actions; and
- reduce聽the risk of failure, reputational harm and loss resulting from poorly overseen variable remuneration outcomes.
ASIC was preparing a detailed report on its findings when the COVID-19 pandemic required a recalibration of our聽 priorities (refer: 20-086MR). It is now intended that the final report will be released later in 2020.
ASIC has proceeded to provide entity specific observations and findings directly to the 21 entities that were subject of the review.
In addition, 魅影直播 has decided to release this information sheet drawing on the review鈥檚 factual findings and framed to assist the boards and remuneration committees of other listed companies to navigate decisions on executive variable pay in the challenging context of COVID-19.聽
Information Sheet 245 Board oversight of executive variable pay decisions during the COVID-19 pandemic (INFO 245)聽focuses on:
- the importance of a robust remuneration governance framework, especially to ensure informed decision making; and
- specific聽factors to consider when exercising discretion on executive variable pay in the current environment.聽聽聽
This follows feedback from representatives of large, listed companies (not subject to the review) that it would be valuable to understand some of the key findings and observations made in the course of conducting the review. This was felt to be particularly useful in the current challenging circumstances.
鈥業t鈥檚 now widely acknowledged that it鈥檚 important the governance practices around awarding variable remuneration are aligned with the long-term interests of a company and its stakeholders鈥�, said Deputy Chair Karen Chester.
鈥楪etting this right is incredibly challenging. But there are key principles which can guide these difficult judgments and we have identified some important ones through this work and hope sharing them more broadly at this time may聽assist in real time聽board and remuneration committee deliberations.'
Background
This review is one of two governance focussed supervisory reviews undertaken by 魅影直播 (the first being ASIC鈥檚 review of oversight of non-financial risk) following the establishment of our Corporate Governance Taskforce in late 2018 鈥� a of the Federal Government to establish a dedicated taskforce to conduct a proactive, targeted and thematic reviews into corporate governance in large listed companies.
ASIC鈥檚 enhanced supervisory program aims to deter misconduct and improve governance and accountability within large listed companies. This work also meets 魅影直播鈥檚 legislative responsibility to:
- promote聽market integrity and consumer protection in the Australian financial聽system
- regulate聽directors鈥� and officers鈥� duties.