Please explain, ASIC urges execs

With the annual reporting season looming, Australian Securities and Investments Commission deputy chairman Belinda Gibson yesterday provided companies with examples of how to clean up their act.

While ASIC has not disclosed where it found its examples of "better disclosure", the text quoted in the advisory is drawn from reports filed by companies including Pacific Brands, Qantas, Brambles and St Barbara. Ms Gibson said companies needed "more effective" disclosure of policy regarding remuneration of key management personnel, non-financial conditions in short-term incentive plans, the reasons why performance conditions were chosen and the terms and conditions of incentive plans.

Yesterday's advisory follows an ASIC review of 60 remuneration reports filed by listed companies last year that Ms Gibson said acted as a "health check".

"We encourage company directors to prepare this year's reports with the overriding objective in mind of explaining the relationship that exists between the company's performance and the remuneration of its executives," she said.

On the remuneration of key managers, ASIC said "many companies outlined the board's policy in very broad terms and did not distinguish between the nature of remuneration and the amount of remuneration".

Companies should explain the factors considered by the board and how pay deals aimed to influence executive behaviour, ASIC said. Companies should give more information about non-financial, short-term goals such as safety, including why they were chosen. And the terms of cash bonuses and share issues to executives should also be disclosed, including the conditions under which boards could grant bonuses or shares.