ASIC provides guidance on board oversight and discretion in executive variable pay schemes
Today, ASIC has released practical guidance to support board oversight and the exercise of discretion surrounding variable pay outcomes of senior executives of large listed companies senior executive.
The guidance is informed by a review of the remuneration governance practices across 21 ASX listed companies. ASIC has released this guidance to assist other listed entities with their decisions surrounding executive pay in the context of the COVID-19 pandemic.
ASIC has observed that the boards of listed entities are experiencing difficult decisions on executive variable pay at a time where the impact of COVID-19 extends to their operations, finances and employees.
Robust remuneration governance is vital to supporting effective and informed board decision making that is appropriate to the current changing circumstances of the entity. For example, decisions that may seem counterintuitive, but are in the entity’s long-term interests.
As the behaviour of board members is often influenced by the variable pay they receive, the decisions surrounding the amount can send strong messages to executives about their conduct and performance that are consistent with the long-term interests of the entity.
ASIC has identified that the effectiveness of board oversight and exercise of discretion would be enhanced by the following factors (specific to the current COVID-19 environment):
For further information or discussion, please contact our Corporate Advisory and Governance team.