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Pay performance

DIRECTORS’ fees and management incentives have featured prominently in the news recently.

For the record, News Corp’s shareholders approved an increase in directors’ fees (while a plan to give options to management was withdrawn), Southcorp’s agreed to an options package for a former CEO and MacMahon’s investors backed an options package for two non-executive directors.

AGM season has become an exciting time for boards.

With all this going on, I was interested to hear from Gerard Daniels Australia director and well-known WA head hunter Lloyd Smith, who says rising pay levels, combined with new guidelines to restrict board membership, is good for corporate governance.

Mr Smith, who is somewhat at odds with others about restrictions on directors’ roles and the fees they earn, believes that the changing circumstances will improve the performance of directors.

“This indicates to me that shareholders do not mind rewarding directors who perform, and they can perform at their best if they are not over-burdened with too many positions,” he said.

Rightly, Mr Smith said the current debate over directors’ fees was dealing in ancient history, when board appointments were often a nice earner for doing little.

These days there is a growing amount of responsibility being shouldered by directors’ – not just in corporate governance but also in understanding the implications of management’s decisions.

As competition for good directors hots up, it is natural that fees will rise. But directors will need to be prepared to show they are worth it – otherwise the very public debate on CEO remuneration will have a sequel.

 

Energy reform

 

LAST week, Western Power started selling gas.

This is a momentous change in our energy market and another stage of a deregulation track that started a decade or so ago.

Clearly, this is a significant shift for small to medium business that use enough gas to warrant competition for their business.

The next important phase is the break-up of Western Power.

While there are concerns with the process, in terms of ensuring there is adequate energy supplies in the medium-term, I think it is time that obstacles to this are removed.

There are times when a government must be allowed to make a decision and see it through – otherwise democracy doesn’t work and the people never get to judge their leaders by the results of their strategies, either as successes or failures.

 

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