insto - Australian financial markets

A focus on a company’s intangible features such as corporate governance, environmental and social responsibility is vital to uncovering its long term asset value. An over emphasis on short term factors that are able to be measured, rather than on longer term qualitative risk issues, contributed to the asset price bubble that preceded the global financial crisis. This according to a corporate governance report prepared by AMP Capital Investors presented at this year’s International Corporate Governance Network conference.

By replacing face-to-face meetings in the US and UK with "immersive telepresence" conferences, global actuarial and consulting firm Milliman's Sydney office expects to save $250,000 in flight and travel costs over the next 12 months.

Milliman, with over 2,100 employees worldwide, established the Sydney office in early 2007 to service a blue-chip client base that includes insurance providers, superannuation funds, investment companies and wealth management businesses.

Attempts to reform Australia’s executive remuneration standards are meeting opposition from all sides. Government, chief executives and corporate regulators alike are not happy, reports Jane Lee.

The decline in companies’ performances worldwide has left investors looking for targets. It’s no surprise that executive pay packages – and termination payments in particular – have again come under the spotlight. And again, as in previous downturns, the catalyst is public outrage in the wake of a series of payout scandals following the collapse of once all-powerful corporate giants such as US insurance company American International Group. Closer to home, incidents such as the stumbling efforts by Australian clothing group Pacific Brands to sack staff while apparently boosting the pay of its own CEO haven’t helped cool tempers.

The newly crowned market supervisor, ASIC, will be sorely tested in this role by Canberra-based financial planning firm Dixon Advisory, which has moved to seize control of listed investment company van Eyk Three Pillars (VTP). Dixons have called for a shake-up that would see four of its own executives on the VTP board.

With calls for executive pay to be capped, and a Productivity Commission enquiry underway, a new survey has revealed that the global financial crisis has already imposed cuts to Australian CEOs’ pay packets.

Management consulting firm Hay Group has revealed that the total annual rewards for Australia's top CEOs declined by 6.8 per cent in the year to May 2009. The firm said the downward moves in total annual reward (fixed pay plus annual incentives) reflected the downturn in corporate profits over the past 12 months.

Risk management strategies may come at a short-term cost to investors, but pension funds that implement them will ultimately save them more money in the long term, says a study.
 
The EDHEC Business School in France compared empirical models of risk controlled and unconstrained allocation strategies over 10 years in order to shed light on the recent debate about whether or not to tighten regulation on pension funds.
 

Our staff reporter Jane Lee went along to hear Productivity Commissioner Chair Gary Banks outline his agenda at a Finsia breakfast briefing on 3 June.  Here are some of the key items to emerge from a wide-ranging speech:

The short-term bonuses for executives have risen, while fixed salaries have dropped to under a third of their total remuneration in the last eight years, said the head of the Government’s independent review into executive remuneration.

The penny has finally dropped for the leaders of the world's largest economies: badly thought out and sloppily negotiated executive pay contracts have actually proved to be a failure of risk management, as Jane Lee reports.

A successful court action taken by ASIC against the board and senior executives of James Hardie Industries will have ongoing ramifications for how restructures are managed.

The Commonwealth Bank of Australia is cutting executive salaries to help save jobs. Chief executive Ralph Norris will have his base pay reduced by 10 per cent, while base wages for members of his senior executive committee will be slashed by 5 per cent. The board of directors will have their pay cut by 10 per cent from July, while the majority of staff earning less than $100,000 per year will have pay rises capped at 1.5 per cent – a decision the Finance Sector Union called the “sting in the tail” of this announcement.