Australian super funds want improved disclosure of executive bonus criteria

Australian Council of Superannuation Investors sets out AGM expectations

Australian superannuation funds have called for better disclosure of the criteria for listed companies’ executive bonuses.

The Australian Council of Superannuation Investors (ACSI), which represents more than 38 domestic funds and three overseas affiliates with a combined A$350bn (€292bn) in funds, has set out is expectations of the current annual general meeting season.

It said: “ACSI expects to see improved bonus disclosure across the S&P/ASX200 in the current reporting season.”
It comes as some high profile executives, including Alan Joyce of Qantas and Marius Kloppers at BHP Billiton have recently announced they are waiving their bonuses this year. And it follows the introduction of the so-called “two strikes” rule a year ago. This means boards can be thrown out if more than 25% of shareholders reject the executive pay scheme for two years running.
ACSI, which assists its members to manage environmental, social and corporate governance (ESG) risk, welcomed the “spectacle” of forgone bonuses but said its issue was more fundamental. It said: “When there is underperformance, investors question why bonuses were available for CEOs to forego in the first place.”ACSI Chief Executive Ann Byrne said: “This year, ACSI would like companies to be very clear about what is and what is not acceptable to superannuation fund shareholders.”

Despite some recent improvements, ACSI maintains that many firms are still failing to explain how bonuses are determined.

ACSI says the two strikes rule has been successful in encouraging engagement between boards and shareholders on executive pay. With a second strike looming at 12 S&P/ASX200 companies, ACSI will assess all remuneration reports on their merits and not follow a pre-determined approach.

“No leading company should any longer claim to be surprised”

“Companies should expect to have their remuneration reports actively scrutinised by super fund investors, and to cop the consequences if they ignore their shareholders’ legitimate interests,” Byrne said.

“No leading company should any longer claim to be surprised by improvements their super fund investors are expecting to see.”

ACSI’s Super Fund Expectations: 2012 Voting Season is available here