Shareholder activism sways executive remuneration policies
New Delhi: Pressure from shareholders is creating a "domino effect" and is pushing regulators and legislators into faster and deeper involvement in executive remuneration issues across Asia, Europe and the Americas, a report says.
According to a global staffing consultancy Mercer, increased shareholder activism and a desire for more corporate governance are driving changes in multi-national executive remuneration.
"Legislators and companies are being forced to improve their responsiveness," Mercer's Executive Rewards team Partner in UK Mark Hoble said, adding that "performance" is a priority focus and is one of the most important factor for deciding the executive remuneration. Moreover, 'context' has also risen up the agenda.
"Companies are considering the appropriateness of their historic pay decisions through the lenses of current public perception and economic performance," Hoble added.
With regards to the Asia Pacific region, Mercer said governance and accountability have been the main trends effecting executive remuneration in the region.
"Regulatory changes are occurring," Mercer's Executive Rewards team in Hong Kong Principal Hans Kothuis said.
The regulatory changes are happening not as a result of the financial crisis, but largely because of the wider recognition that a more supportive infrastructure and governance regime is required to support the 'Asian century'.
"Listed companies in Asia are increasingly taking action towards more transparent communication with shareholders: they are explaining more clearly the rationale for their pay decisions and are providing more information on incentive plans," Kothuis said.
Giving details, the report said in Hong Kong, there are updated listing rules on corporate governance while Singapore has issued enhanced disclosure requirements. The Reserve Bank of India has come out with new guidelines on remuneration in banks.
In Australia, new rules mean that two negative votes in an Annual General Meeting can result in a board spill, meaning that executives must seek re-election.
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