Business Insight

Board Priorities 2024: Executive Remuneration

11 January 2024

Remuneration will continue to be a contentious issue in 2024 and, as ever, all entities should approach significant pay and bonus increases and new incentive arrangements with caution. 2023 saw widespread shareholder revolt globally against what was perceived to be unfair remuneration to directors and senior management, particularly at a time when the costs of living are substantially increasing.

Determining the right compensation packages will remain critical and remuneration committees should continue to determine the appropriate level of executive compensation and incentive structures with the objective of recruiting and retaining the best management available. Boards must continue focussing on demonstrating an awareness of the potential impact of compensation structures on business priorities and risk-taking, taking into account specific goals like climate sustainability and public and political views on compensation.

Globally, investors and other key stakeholders of listed companies and larger private companies expect (and in some cases regulators have already mandated):

Risk alignment: pay structures to deter excessive risk taking such as deferral of vesting, implementing stretch performance targets and clawback mechanisms; and
Increased transparency: increased disclosure on executive pay, particularly in annual reports and appropriate consultation with stakeholders on matters such as significant pay increases.

Mounting economic headwinds present an important opportunity for boards to ensure the remuneration being proposed for executives is both market competitive and aligned with changing organizational strategies. A thorough review of remuneration, including an external market analysis and benchmarking, should assist in providing comfort to shareholders that the entity's compensation strategy is well-calibrated.

Read about the other Board Priorities for 2024

Miriam Kleiner, Partner, Legal Governance Advisory, Sydney

T: +61 417 428 955
E: Miriam.Kleiner@ashurst.com

Miriam is a partner in our legal governance advisory practice in Australia. Miriam works side by side with Boards and senior management to provide advice on a broad range of governance issues including in relation to annual and other periodic reporting, AGMs and other shareholder meetings, continuous disclosure, governance structures, directors’ duties, legal and regulatory compliance, conflict matters, securities and insider trading issues, preparation of deeds of access, insurance and indemnity, executive remuneration, best practice principles and other corporate governance matters.

Joshua Smith, Partner & Head, Board Advisory, Sydney

T: +61 403 323 733
E: Joshua.Smith@ashurst.com

Joshua has acted as a trusted adviser to the Chairs, Boards and CEOs of Australasia's largest companies, both public and private, on issues related to governance, leadership and performance.

As the Head of our Board Advisory Practice, Joshua focuses on assisting his clients to enhance organisational and board performance, including their leadership capability. His areas of interest and expertise include board and company performance, board composition, board and CEO succession planning and search, and diversity. He has acted for the boards of more than 100 ASX 200 companies during his career.

Rebecca Servian, Senior Associate, London

T: +44 7823 340 869
E: Rebecca.Servian@ashurst.com

Rebecca is a senior associate and heads the Incentives practice at Ashurst. She provides advice to UK listed, AIM and private companies on the design and implementation of directors' remuneration policies and in relation to both discretionary executives' incentive arrangements and all-employee share plans. This includes advice on directors' remuneration reporting, FCA remuneration codes and corporate governance code recommendations when reporting on remuneration. She also advises banks and financial institutions on remuneration aspects of financial services regulation. Rebecca works closely with heads of remuneration, reward specialists, general counsel and company secretaries to provide advice on those regulations impacting the operation and development of employees' and directors' share plans.

This publication is a joint publication from Ashurst LLP, Ashurst Australia and Ashurst Boardroom Advisory Pty Ltd, which are all part of the Ashurst Group.

Ashurst Boardroom Advisory Pty Ltd services do not constitute legal services or legal advice, and are not provided by qualified legal practitioners acting in that capacity. The laws and regulations which govern the provision of legal services in the relevant jurisdiction do not apply to the provision of risk advisory (non-legal) services.

This publication is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to. Readers should take legal advice before applying the information contained in this publication to specific issues or transactions.