Executive pay key focus in AGM season
Executive remuneration will feature in the upcoming annual general meeting season next month, with some real estate investment trusts sitting on one strike from last year after shareholders rejected high salaries.
In the latest set of accounts for the 2013 year, most REIT senior managers received pay rises, though some were more modest than the previous years, while others attracted commentary for being very high.
Lend Lease has one strike and restructured the package for chief executive Steve McCann, while Charter Hall has updated the contracts for the joint managing directors, David Harrison and David Southon.
Investors have said they will focus on the remuneration reports in the AGM season, even though the REIT sector had one of its best-performing periods for some time, up to the end of reporting season in August.
The weakening office market, concerns about the bond rates and ongoing takeover speculation between Dexus Property and Commonwealth Property has dampened REIT returns on the sharemarket in the past few weeks.
The managing director of Maxim Asset Management, Winston Sammut, said noting the new employment arrangements proposed for Charter Hall's joint managing directors, it would be most interesting to see how investors and the various proxy houses will approach the upcoming AGMs, and the vote as to how the remuneration packages will pan out.
"No doubt, of particular interest given the 'three strikes' policy now in place, will be the outcome for a number of companies which include Lend Lease," Mr Sammut said.
Under the Charter Hall contract, Mr Harrison and Mr Southon have entered into new employment contracts providing for much longer notice periods and the introduction of restraint provisions.
The contracts, if approved by security-holders, will include a one-off special three-year long-term incentive award for each managing director of a $30,000 increase in their fixed remuneration for 2014 to $1.08 million.
There will also be a target short-term incentive opportunity from the 2014 financial year of $660,000 for Mr Southon and $760,000 for Mr Harrison. The actual short-term incentive outcome will depend upon Charter Hall Group's and the joint managing directors' performance during the year. Two thirds of any short-term incentive for the 2014 financial year will be delivered in cash and the balance in deferred performance rights.
The two directors have also seen the current three-month notice period for resigning being extended to 12 months - if they are sacked - and six months if they resign.
However, for either director a new "non compete" clause has been added for the first time whereby if they leave they cannot go to another competitor for a period of 12 months.
In August Lend Lease renewed Mr McCann's contract and his remuneration package had been restructured to increase the emphasis on long-term incentives, with a related reduction in short-term incentives. The new deal provides for fixed remuneration of $2.03 million, which included superannuation and salary-sacrifice items.