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Tap Oil comes out on top for disclosure

IF there were an award for the company that provides the best disclosure on executive remuneration, Tap Oil would be a clear winner.

Runners-up would include West Australian Newspapers and Consolidated Minerals.

These companies are set apart by their disclosure of specific performance targets upon which remuneration is based.

They do not provide full details. Nevertheless, they stand in contrast to the vast majority of companies that provide only a broad description of their remuneration policies.

The award for brevity would go to GRD.

Its annual report simply stated: “Remuneration levels for directors are competitively set to attract the most qualified and experienced directors”.

This was from a company that paid its managing director (and major shareholder) Brett Fogarty a $400,000 bonus last year, more than doubling his $300,000 salary.

In contrast, Tap Oil provides nearly two pages of explanation of its remuneration policies.

Tap Oil managing director Paul Underwood received a total of $661,948 last financial year.

Just more than two thirds was in the form of salary and superannuation, with the balance derived from incentive schemes.

Mr Underwood’s short-term incentive payment ($78,000 or 17.5 per cent of fixed salary) was based on unspecified performance targets, while his long-term incentive ($123,200) was based on Tap’s out performance of the S&P/ASX Energy 300 Accumulation Index.

The scale of possible payments was specified in the annual report.

Both incentive schemes have been restructured for 2004, with stepped performance objectives and variable incentive payments.

The maximum amounts payable to Mr Underwood will be 40 per cent of basic salary for “outstanding” short-term performance and 80 per cent of basic salary for “outstanding” long-term performance.

The latter is based on Tap’s total shareholder returns relative to the returns achieved by a comparative group of companies.

To qualify for the maximum payment, Tap’s return must rank in the 80th percentile.

Tap has also agreed that the long-term incentive would be a mix of cash, shares and options, rather than just cash.

Consolidated Minerals provides far less detail than Tap Oil but it does specify the all-important performance hurdle for its annual profit sharing pool.

The pool is a proportion of after-tax profit that exceeds a targeted return on shareholders’ funds.

Last year, the targeted rate was 12.5 per cent and managing director Malcolm Kiernan received a bonus of $183,784 (47 per cent of base salary).

In the previous year, when the targeted rate was 15 per cent, Mr Kiernan received a bonus of $348,103 (100 per cent of base salary, the maximum allowable level).

WA Newspapers has instituted an annual incentive scheme for managing director Ian Law that has three performance targets.

These include WA Newspapers’ total shareholder return being in the top quartile of the S&P/ASX 100 accumulation index.

Based on his performance during the 2003 financial year, Mr Law received an incentive payment of $116,531.

This was equivalent to 20 per cent of base remuneration and compared to a maximum possible bonus of 50 per cent.

Foodland is another company that applies a 50 per cent ceiling on annual bonuses but it does not specify the basis for such payments.

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