Advisers oppose Transfield chief's pay
Proxy adviser ISS has told clients plans by Transfield to award the chief executive, Graham Hunt, a "success fee" has no rationale, and should be opposed.
The matter is to be considered by shareholders at the company's annual meeting later this week.
When Mr Hunt was appointed early this year, he was awarded the right to be granted up to 840,700 shares in respect of the financial year to June 30, a further $1.5 million of shares for fiscal 2014 and a deferred success fee of up to another 235,900 shares.
ISS told clients the "success fee" is not appropriate given the company's continued poor performance in fiscal 2013.
As well, shareholders have not been given sufficient information on specific performance targets to justify the payment, and the value of the award is "not consistent with market cap peers".
In the year to June, Mr Hunt received a total remuneration of $1.86 million, which includes $420,750 in short-term incentives, being part of the package of shares to be voted on at the meeting.
Another investor adviser, CGI Glass Lewis, has told clients Mr Hunt's fixed pay of $1.5 million is "approximately 46 per cent higher than the median for total fixed remuneration of the company's index cap peers in financial year 2013".
It said it "views high fixed remuneration with scepticism, as such remuneration is not directly linked to performance and may serve as a crutch when performance has fallen below expectations".
"In our view the large incentive-based pay is largely the result of high fixed remuneration as it has a compounding effect on the amount of short and long-term incentives granted to an executive, since such awards are granted as a fixed percentage of fixed remuneration."
Transfield has failed to "provide a thorough and convincing explanation for such high fixed remuneration", it told clients.
Frequently Asked Questions about this Article…
Advisers are opposing the Transfield CEO's pay package because they believe the 'success fee' lacks rationale, especially given the company's poor performance in fiscal 2013. They also feel that shareholders haven't been provided with enough information on performance targets to justify the payment.
The controversy around the Transfield CEO's 'success fee' stems from the belief that it is inappropriate due to the company's continued poor performance. Advisory firms argue that the fee is not justified and lacks transparency regarding performance targets.
The Transfield CEO's fixed pay is approximately 46% higher than the median for total fixed remuneration of the company's index cap peers in the financial year 2013, according to CGI Glass Lewis.
Advisers are concerned that high fixed remuneration is not directly linked to performance and may act as a crutch when performance falls below expectations. They believe it can lead to disproportionately large incentive-based pay.
In the year to June, the Transfield CEO received a total remuneration of $1.86 million, which includes $420,750 in short-term incentives as part of the share package to be voted on at the meeting.
Advisory firms provide guidance to institutional investors on CEO pay decisions. They analyze pay packages and offer recommendations, such as opposing or supporting certain compensation plans based on company performance and market standards.
Transparency in executive compensation is crucial because it ensures that shareholders understand the rationale behind pay packages. It helps justify the compensation based on performance targets and aligns executive incentives with company success.
High fixed remuneration can have a compounding effect on incentive-based pay, as these awards are often granted as a fixed percentage of the fixed remuneration. This can lead to disproportionately large incentive payouts, regardless of company performance.
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