| The Board has a formal and transparent procedure for developing policy on director and executive remuneration, and for fixing the remuneration packages of individual directors and key management personnel. No director is involved in deciding his or her own remuneration. |
This Principle describes the role and duties of the Board on remuneration matters.
The governance of remuneration is particularly challenging as it is increasingly a subject of much public scrutiny. It is therefore important for directors to develop policies and processes that are transparent and accountable, and that produce defensible outcomes.
A common approach is to establish a Remuneration Committee (RC) whose key terms of reference are to review and set the remuneration packages of individual directors and key executives, based on established criteria.
The Provisions describe:
- The formation and duties of an RC (Provision 6.1).
- The composition of an RC (Provision 6.2).
- The need to consider all aspects of remuneration (Provision 6.3).
- The engagement of remuneration consultants (Provision 6.4).
Provision 6.1
The Board establishes a Remuneration Committee ("RC")16 to review and make recommendations to the Board on:
- a framework of remuneration for the Board and key management personnel; and
Provision 6.2
The RC comprises at least three directors. All members of the RC are non-executive directors, the majority of whom, including the RC Chairman, are independent.
Provision 6.3
The RC considers all aspects of remuneration including termination terms to ensure they are fair.
Provision 6.4
The company discloses the engagement of any remuneration consultants and their independence in the company’s annual report.