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Metals & Mining CEO Remuneration Updates
As company reports continue to roll in, we ran some early analysis to understand remuneration changes for CEOs of Metals & Mining Sector companies who have been in the same role for the last two years.
What is the data is telling us?
- Fixed pay increases on average 7% – with the backdrop of some catch up footy from little to no pay increase in 2020, and most commodities having a sterling run over the last year (which has been largely translated into significant TSR movements), many CEOs in our sample have seen substantive increases. Estimates from our May 2021 Pulse Survey indicated 2-3% which is well below the actual data from the sample to date
- Reduced number of maximum Short term incentive payouts – 17% of companies from the sample awarded the CEO 100% of maximum STI, well short of the 28% we saw from the same group of companies last year. Given the strong performance of the sector, this was a surprising outcome and may reflect boards exercising downward discretion in consideration of factors beyond the scheme mechanics
- Increased LTI grant value – the overall levels of LTIs awarded were higher than the previous year. When looking at the value of LTI grants as a percentage of base salary, there is a noticeable increase in the average, from 82% in 2020 to 98% in 2021.
More detailed breakdown of the TRP database will be provided later in the year and upon the completion of the reporting season. This will include analysis of TRP 150 (comprising all sectors) and the ASX300 Metals and Mining Index.
YTD Remuneration Report Voting Outcomes
As at 10 September 2021
Below we’ve charted the Remuneration Report voting outcomes of 43 ASX300 companies for the 2021 AGM season to date. So far we have noted slightly higher instances of strikes and near misses than in previous years. We will provide another update as results come to hand.
Our observations of responses to ‘strikes’ indicate most companies (20 out of 23) have made changes ranging from significant structural redesign to enhancing the disclosure and transparency (particularly with hurdles relating to incentive plans). Some specific actions companies have taken include:
- Enhanced disclosure – in addition to greater supporting rationale for ‘why’ remuneration approaches have been adopted. ING, for example has included disclosing targets for past STI awards.
- Governance – a growing trend to introduce a minimum shareholding requirement for executives and NEDs typically around 100% of fixed remuneration (Bapcor, ING, Sigma)
- LTI – increasing performance periods from 3 years to 4 years (AP Eagers, Northern Star, Sandfire).
- STI – introducing deferral (LendLease, Sigma Health) and gateways (Carnarvon Petroleum – share price, QUBE – safety)
Strike Responses Tracker
A total of 28 ASX300 companies recorded a ‘strike’ against their Remuneration Report in 2020. We have grouped responses to the ‘strike’ into 6 main categories which are illustrated in the chart below.
Main response categories
- No changes in response to shareholder concerns
- Change to variable pay structure (E.g.,changes to measures, weighting, performance period or vesting schedule)
- Change to quantum (E.g., reduced fixed remuneration or STI/LTI opportunity or max. opportunity, NED fees)
- Formalising use of discretion (E.g., framework or formal approach disclosed)
- Disclosure/communication enhanced (E.g., improvement in disclosure of STI outcomes from prior year)
|*What is a strike?
If a company’s remuneration report outlining salary and incentives of key management personnel (KMP) receives a ‘no’ vote of 25% or greater from shareholders at the annual general meeting, the company receives a first ‘strike’.
If the following year’s remuneration report also receives a ‘no’ vote of 25% or more, the company receives a second ‘strike’. When a second ‘strike’ occurs, shareholders vote then and there to decide whether company directors must stand for re-election. This is known as a ‘spill’ vote. If the spill vote passes (i.e., 50% or more of eligible votes cast), a spill meeting is held within 90 days and the directors stand for re-election.
See our blog “10 Years On Does The 2 Strikes Law Really Matter?” for more information.
About this resource
Leveraging data and tools from our research platform, The Reward Practice has developed this resource for the 2021 ASX reporting season to keep you updated on key ASX300 executive remuneration and governance insights as they happen.
Data is gathered from the most recent 2021 Remuneration Reports, and translated into our weekly commentary including insights relating to:
- Remuneration structures – how prevalent will companies use retention grants to manage an uncertain future? Is deferring some/all of STI growing in prevalence as companies seek to manage unforeseen events?
- Fixed remuneration – with many companies restraining pay last year, some industries now experiencing growth and retention concerns, will we see material fixed pay increases?
- Incentive measures – will non-financial measures adopt greater weighting in STI and LTI plans? Environmental, Social, Governance (ESG) is a key consideration but how will it feature within executive incentive plans?
We have also developed an ASX300 Remuneration Report tracking tool to provide insights on:
- Rem ‘strike’ responses – company responses on remuneration matters since receiving a ‘strike’ last year
- Shareholder voting outcomes – how shareholders have responded to 2021 Remuneration Reports including ‘strikes’ and near misses
- Remuneration Report quality – who is doing it better than others? Our assessment of the 2021 Remuneration Report readability, accuracy and disclosure
The aim is to monitor and consolidate remuneration concerns, trends and actions and have this page serve as an informational reference for our readers as the 2021 reporting season progresses.