In Unity on matters healthy, wealthy and wise

Not that the mutual's earnings performance in the past year was shabby, or that it is not paying out ever-increasing amounts to its premium-paying members.

Australian Unity is also technically not required to even produce the numbers because it is not listed on the ASX. Chairman Alan Castleman and his board, however, have adopted ASX governance principles which not only means a nice track record should the group actually decide to take the plunge, but Australian Unity gets an elephant stamp from Insider for electing to be more transparent than required.

Still, strip out the $1.2 million a year picked up by non-executive directors, and the total tossed to its five nominated senior management personnel rose from $2.9 million to $5.6 million which is getting close to a near doubling in anyone's books.

Insider is often loath to quote gross payments to executives, as described in remuneration reports, because the quirks of the accounting system require companies to place a present-day value on shares that executives are yet to actually receive because they are a deferred benefit (hence the name).

Part of that accounting was one of the reason why Qantas chief Alan Joyce's income appears extra jammy this year although chairman Leigh Clifford and his team did not help things by saying, "Hey, had we paid him a cash bonus last year, it would not look as if he was rolling in it this year."

To Insider's thinking, that seems to somewhat undermine all the arguments that there is an exact science of remuneration architecture for calculating rewards because it seems to suggest that in the background there was always an expectation by Joyce that he would be handsomely rewarded.

In Australian Unity's case, long-term benefits are deferred over a three-year period, described just like its listed counterparts as "performance rights", but when they mature those benefits are actually paid in cash rather than shares because it is a mutual.

While there is every chance that executives at the health and retirement incomes specialist might not clear the hurdle rates given that the 2011 report published yesterday showed that a proportion of their long-term rewards had been forfeited the numbers in the 2011 accounts suggest that part of the amounts reflect actual cash payments.

Separate tables disclose that in October last year, proportions of 2006 and 2007 entitlements became due. Even though half the 2006 amount was forfeited, and about one-third of 2007's incentive, there is some good additional money being paid for longevity and performance.

Because Australian Unity is paying long-term rewards in cash, it shows more clearly than usual how these incentives are really a product of what Insider calls reverse engineering the company first decides the maximum incentive for each employee, and then issues the appropriate number of performance rights that would get them over the hurdle if the only criterion was the company's earnings growth. The second layer applied is individual performance targets, which strips back the total eventually awarded.

For example, Australian Unity's chief investments man, David Bryant, has long-term incentives due to mature in 2012 and 2013, both bundles of which are valued at $455,000 in the report. Yet the number of performance rights applying to each of those is 887,270 for the first, and 744,730 for the second.

The differential values reflect the mathematical calculation of how much the company's performance each year exceeded the threshold at which the incentive kicks in. The outcome would be substantially different from what happens when long-term incentives are made in shares, because their end value is dependent on the market. Cash is pretty much always worth the face value.

Now that's a bonus

AUSTRALIAN Unity's executives in 2011 have been treated to what appear to be their first-ever cash bonuses although group managing director Rohan Mead was beaten by his investments chief, David Bryant, for the biggest cheque.

Bryant, whose base pay rocketed almost $100,000 in the year to $612,351, also had a short-term bonus of $312,000.

Mead had to be content with a flat $300,000, although his base earnings did jump by more than $100,000 to $879,274 for the year. Mead's long-term bonus, which presumably includes some real cash as well as the notional value of performance incentives,

was up from $200,000 to $383,333, which meant that the overall value of his pay packet in 2011 was up more than 50 per cent to $1.59 million. As for the board, chairman Alan Castleman took home $240,000, while all his fellow directors received half that amount. Their collective $1.2 million was, though, the maximum allowed for directors' fees, which makes Insider suspect that there is a high chance for a resolution at the annual meeting next month to lift the ceiling on directors' fees.

Luckily for Australian Unity, its members do not get to vote on remuneration reports under the new "two strikes" rule, because they are not shareholders.

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Luckily for Australian Unity, its members do not get to vote on remuneration reports because they are not shareholders.