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Get tough on remuneration, company boards told

Australia’s biggest superannuation fund has sounded a warning to companies that boards need to take a tougher line on pay for “greedy executives” and should consider leaving the sharemarket if they are not prepared to face “active owners.”

Australian Super chief executive Ian Silk said some companies still regarded shareholders as “nuisance’’ but they should be better prepared to deal with shareholders that regarded their ownership as “valuable property”.

Shareholders have flexed their muscles during the annual shareholder meeting season, delivering rebukes to a raft of major companies over board pay, including Commonwealth Bank — the first bank to receive a first strike — Boral, AGL, CSL and Goodman Group. Other companies including CBA, Magellan Financial and Lend Lease have withdrawn pay resolutions to avoid an investor backlash.

AustralianSuper, which manages $105 billion for two million members, said it had voted against 5 per cent of pay reports among 1329 shareholder resolutions it had to consider.

“Five per cent strikes me as rather too high, a little higher than we would like,’’ Mr Silk told the investor relations managers of some of Australia’s biggest companies in Sydney yesterday.

Mr Silk said the focus on remuneration reports was “unfortunate’’ but they were a “very good bellwether” of the willingness of boards to stand up for the rights of shareholders.

“If one of my executives comes to me and requests or demands an excessive pay increase and I agree to that, well whose responsibility is that? It is mine of course.

“So it is one thing to criticise ‘greedy executives’ but ‘greedy executives’ don’t write their own pay cheques,’’ Mr Silk told the Australasian Investor Relations Association conference.

“It is boards, who should be acting on behalf of the company and shareholders.

“A lot of boards, a lot of chairs of remunerations committees, need to ensure they have got the balance right, rather than acquiesce to the demands, as they often are, of management.’’

Mr Silk conceded that better disclosure of executive pay had led to higher remuneration as companies were forced to meet the market. But he said it had also helped expose excessive pay.

Shareholders can force a board spill if 25 per cent or more of shares voted oppose a remuneration report at two successive annual meetings.

While industry super funds have been seen as leading a move to more active management, Mr Silk said commercial competitors such as AMP and BlackRock were also taking a stronger stance.

He said companies that were not prepared to engage with shareholders should not list or should consider delisting.

Mr Silk said a range of listed companies “simply aren’t accountable to their shareholders’’ and should be delisted if they can’t address the needs of active ­owners.

“These companies regard shareholders as an aggravation, a nuisance that they should not have to endure.

“But we are the owners and we do have the right and the fiduciary responsibility to be active when the occasion demands.”

It's about time some institutional investors started to vote against the disgustingly generous remuneration packages to often totally useless company executives!  To date, it has been left entirely to the 'mum and dad' investors to try to stop these obscene rorts!

I hope more funds start to flex their muscles when the AGMs come around!  Do the right thing by super fund members who are disgusted at the executive pay rorts by companies.  After all, these days all you have to do as a CEO, executive or Director to get a huge pay boost is to stay alive - forget about making a profit, or your company improving its performance overall!  So many of these executives make the most patently stupid decisions - decisions that any ordinary investor could predict would fail!  And they do!  'Masters' is a prime example!  Yet, I'm sure the executives that made that stupid decision are laughing all the way to the bank!

The trouble has been that super fund executives and company executives are all part of one big 'boys' club' of leeches!

This article first appeared on The Australian website on 25 November 2016.

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