Is executive pay in Australia at a major turning point? While recent headlines could give this impression, executive pay fundamentals haven’t changed. Remuneration still needs to be set to support a company’s culture, strategy and objectives, provide alignment with stakeholders and manage risk.
Mergers and acquisitions (M&A) take a number of forms but most give rise to a significant number of reward issues that need to be identified and managed to enhance chances of deal success. Retaining and incentivizing the right leadership team to deliver on a new business agenda is one of the critical areas.
The role of independent non-executive or outside board directors is getting tougher throughout Asia because of a confluence of several notable trends, a change that can warrant higher pay.
An increasing number of companies listed on the Australian Securities Exchange (ASX) are responding to shareholder and community concerns about CEO and executive pay by moving away from what has been the globally ubiquitous model of fixed pay plus short-term incentives (STI) plus long-term incentives (LTI).
Recently, Willis Towers Watson consultants discussed important executive compensation issues, including corporate governance and executive and board pay, with several leading institutional investors in Asia, with some surprising viewpoints.
Regular compensation risk assessments have been common in many Western countries for several years now, and many companies have found that the exercises have been helpful in identifying and reducing pay- and behavior-related risks and in streamlining incentive design and governance processes. The trend is catching on in Asia.
Since mid-2009, Australia has taxed stock options at the moment of vesting (i.e. when the risk of forfeiture passes) or, in some cases, at grant. A bill was recently introduced into the Australian parliament to change the taxable event for options back to the date of exercise, consistent with global norms and the tax treatment that applied in Australia previously.
Paul Baillie and Angelica Decena
While U.S. executives remain the world’s most highly paid, evolving talent markets and continuing globalization have begun to narrow the differences in executive rewards practices between many countries around the world. Competing for top cadre talent today requires an understanding of ongoing global trends in rewards, plus close attention to the remaining differences — some quite significant — in how key rewards programs are structured from country to country.
James Matthews and David Seitz
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CEO PAY RATIO TRENDS
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