Focus on executive remuneration

Often it seems like the most widely read section of a listed company’s Annual Report is not the page that tells us what their profit (or loss) is for the year but rather it’s the Remuneration Report that names the key executives and their remuneration.

With shareholders, proxy advisors, institutional investors, the media and other stakeholders increasing their focus on the remuneration of directors and Key Management Personnel (KMP), Remuneration Reports have never been more important. This is also why they continue to grow in length each year. As directors and KMP have responsibility for the overall management and custodianship of the organisation, stakeholders want to understand how these individuals are being remunerated, their behaviours will support the achievement of the organisation’s strategies (including those related to ESG) and that their interests are aligned with those of shareholders, employees, customers and society in general.

Executive Summary for Directors

For a high level overview of some of the key topics included in the full publication, there is an executive summary. This executive summary may be useful for Directors or other individuals who require only a broad understanding of the requirements for the Remuneration Report.

Download the Executive Summary for Directors (PDF 861KB)

Producing effective Remuneration Reports is challenging

A clear and understandable Remuneration Report explains how KMPs are remunerated in the short, medium and long-term and links that remuneration back to the performance of the organisation.

This is challenging as the Remuneration Report is not only about compliance with the relevant legislation, it is also a key communication tool between the organisation and its stakeholders. The Remuneration Report should tell the story of how the remuneration framework is structured, the remuneration outcomes and how that aligns to the creation of long-term sustainable value, for both shareholders and other key stakeholders. It should be forward looking as well as reporting on what has happened in the current year. This all needs to be balanced against the privacy of the individuals captured in the report which is a challenging balancing act.

Due to the many different facets the Remuneration Report aims to cover, it often also involves many different parts of the organisation working together to prepare it. Human Resources and Finance are usually the key parties involved, but often the Company Secretary, General Counsel, Investor Relations and even the Board or Remuneration Committee may have significant input as well. With all these competing viewpoints and priorities, it can be easy to lose focus on what the key statutory requirements are that must be included in the Remuneration Report.

Key Remuneration Reporting areas considered

This publication (2nd edition) provides guidance to help ensure that you produce Remuneration Reports that are effective communication tools, aspiring to align with best practice, and which ultimately comply with the Corporations Act (2001). 

It addresses common questions we are asked in practice, including:

  • Preparation of Remuneration Reports
  • Who is included in the Remuneration Report
  • General disclosures, including how ESG measures should be disclosed
  • Treatment of specific transactions in the statutory remuneration table
  • Employee share loans
  • Modifying share-based payment awards
  • Deferred short-term incentive arrangements
  • Malus and clawback clauses
  • ‘Two-strike’ rule.

Detailed discussion on each of these topics can be found in our report.

Additional topics covered in this edition:

  • Tips for improving non-statutory remuneration reporting
  • Considerations when prior period misstatements are identified
  • Considerations for newly listed companies
  • Tips for disclosing performance hurdles and outcomes
  • Disclosures of ESG measures
  • Additional guidance on termination payments
  • Deferred short-term incentive arrangements

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