Directors Remuneration

[Buddy]

As it is now the AGM season, we are receiving the Proxy Forms and instructions for voting.
I have decided that I will start voting (I rarely send back the forms) against the renumeration report and increase of payments to non executive directors. I realise that this is largely symbolic because the boards do not have to accept the vote on this issue. However I think it is time for shareholders to voice their displeasure at the level of fees paid to directors, and in particular the increases being sought. For example BHPB are seeking to increase the pool from $3.0m to 3.8m this year.

My reasons for this are:-
1) Why should directors fees go up when the share prices are going down. For example, BHPB is now back to 2005-2005 levels, yet the directors argument is that they havn't had a pay rise since 2006. Ok, you can have CPI but not 27%. BHPB is a dreadful company. Whilst their P/E might be OK, the yield to shareholders is pathetic.
2) Shareholders worth is going down. Directors must also feel some of this pain. You are obviously not performing. But of course they will say, it is because of events outside of their control. Which begs the question "Why have highly paid directors if you have no control over events?"
3) I am sick of the argument that they need high fees to "attract the best". Sorry guys that doesnt' wash up either. There are plenty of talented people around. Market forces should set the renumeration, not the back room scratch my back directors club. Fees are currently set by an oligarchy. This must change; it is killing our companies and soaking up shareholder funds in the oligarchy pockets.

I urge all small shareholders to start rejecting these fee increases. At least the amount of paperwork going back to the companies will send a signal. And dare I say it, how about the institutions coming onboard. After all, it is not "your" money, it is "our" superannuation money that you are playing with.

 

[Happy]

Recently there was reported voting down the proposal to increase payments to Co directors, but they went ahead and increased anyway.
I forgot which company it was.

There must be something better to control and prevent disproportionate payments to executives; indiscriminate cap would do the trick.

Another proposition could be 5 or 10 times the salary of the lowest paid employee and contract workers like cleaners should be included in this too, as I can instantly see that there is way around that requirement.

 

[Julia]

There are plenty of talented people around. Market forces should set the renumeration,

Market forces do in fact set the remuneration. Any of us who have ever competed for a job know that we can negotiate what we are deemed by the prospective employer to be worth.

If there are 'plenty of talented people around' it seems a little surprising that of the CEO's of the big four banks one is a Scot, one is a South African, and one is a New Zealander. There would appear to be somewhat of a dearth of talent in Australia.

 

[brettc4]

I don't think we have a lack of talent, what I do think though is that the Boards appointing the CEO believe there is a lack of talent.
It certainly helps the arguement that we need to pay higher because we are trying to attact staff from a global marketplace.

The recent changes in the US are seeing caps put on renumeration and about time consering how poorly governed a number of companies are.

When something goes wrong there is finger pointing everywhere but themselves. They are in the possition to look out for my interest, not their own.

I believe that a CEO should never be Chariman, and that the portion of the board determining Salraies should not include any directors, and should also include an independent outsider.

I don't believe directors (not all but a large majority) do not actually have the investors best interests at heart. I see it as a bit of the old boys club (I know there are women as well) but they all pat each other on the back, look around at who is earning what and say, I should be getting more than that guy, lets increase our pool.

I can't do that, I need to show how well I am performing, how much I can contribute, how much revenue I am bringing in. If you work for the government, completely forget it.

There really must be tighter control, and investors need to have more say. I would like to see investors cap renumeration for a few years, possibly remove some dead wood.

I know I am not voting for any renumberation increases this year.

For those interest, read the Icahn report (do a google search) for his thoughts on corporate governance.

Brett

 

[Buddy]

The point I was trying to make Julia, is that market forces do not set the salary levels. Misguided directors clubs set the levels. I also agree with what Brett says relating to "talent".

I get annoyed when directors vote themselves a (substantial) pay increase when shareholders wealth is being eroded, eg BHPB et al.

Anyway, I've posted in my vote to BHP and Bluescope, opposing the renumeration sections. More to come. Yes, I know, meaningless. Just call me Don Quixote.

 

[johenmo]

I don't believe directors (not all but a large majority) do not actually have the investors best interests at heart. I see it as a bit of the old boys club (I know there are women as well) but they all pat each other on the back, look around at who is earning what and say, I should be getting more than that guy, lets increase our pool.

Look at OXR/OZL and BNB (I have shares in both).
OZL - the vote for $10+ mill to Hegarty was no and it was withdrawn. So the board kept under the 7x level and paid him $8+ mill. HELLO!!! THe shareholders said NO!

BNB - look at the makeup of the board. The current chairperson has a less than startling track record, yet can go from board to board.

I can understand a good director being wanted, but when I read of one person being the Chairman of 3 large companies (Saturday's paper) I wonder just how well they can do with several interests. "A man can not serve two masters."

I agree with Brett, and it's hard not to believe that the golden parachute/condom dished out upon hiring is a mutual thing. I don't know any middle to lowly paid employees who get fired or leave and get paid such enormous multiples. So I think the market remuneration is a manipulation amongst an "elite" group of people with enormous egos and little in the way of ethics. And yes, there will be some expceptions.

 

[prawn_86]

So I think the market remuneration is a manipulation amongst an "elite" group of people with enormous egos and little in the way of ethics. And yes, there will be some expceptions.

Now how do i get into this group in order to set my family up for life....?

 

[nunthewiser]

Germany has set a salary cap for top bank managers........ good move now how about spreading the idea to other sectors

http://biz.yahoo.com/ap/081020/eu_germany_meltdown_banks.html

 

[fimmwolf]

Germany has set a salary cap for top bank managers........ good move now how about spreading the idea to other sectors

http://biz.yahoo.com/ap/081020/eu_germany_meltdown_banks.html

That'll just mean that German bankers will look for contracts outside Germany.

If you listen to the banking executives, and I'm not saying you should, they would argue that they add "value" and therefore deserve their bonuses and exorbitant salary packages.

That value often isn't realised until long after they no longer work for that institution, and sometimes, not at all.

 

[chops_a_must]

What would be good is if the board themselves aren't allowed to vote on their own salaries.

That would be a start.

As would a salary cap.

There isn't any link between success on boards to anything other than height.

 

[brettc4]

One of the stated reasons for golden parachutes, is to stop takeovers from occuring.

I would like to know if anyone has done a study which determines if takeovers are good or bad for shareholders in the company being acquired.

If the study says it is good for shareholders, and directors are looking out for shareholder interests, this practice should not be allowed.

What I believe it does, it lets inept executives ruin a company to a greater degree until someone who can generate value, sees the opporunity, and then waits for that company to implode further to the point where the acquiring company can still make money irrespective of the golden parachute.

I know I am voting No on all runemeration increases this year and for the foreseeable future until I can see a board itself, and not the companies staff, increase value.

Is anyone here a member of the Shareholders association? I am wondering wha their position on this is, do they have information about which boards are actually performing well etc.

Brett

 

[Macquack]

If there are 'plenty of talented people around' it seems a little surprising that of the CEO's of the big four banks one is a Scot, one is a South African, and one is a New Zealander. There would appear to be somewhat of a dearth of talent in Australia.

If you are saying we have a "lack of talent" in Australia for producing executives who can best "rort the masses for their own personal gain", then I say we should remain talentless.

 

[johenmo]

.....golden parachutes....

read the other day they are also described as golden condoms - screwing the shareholders. Like that one,

My FILaw has been on numerous boards as a director. Fees nothing like some that are around. Has worked in developing countries. Asked him about it and he believes it's unethical to take what some of them are getting. And connections has a lot to do with it for many of them. That's why the same names pop up again and agin.