A. Explanation

This Provision encourages the use of an appropriate level of remuneration to attract, retain and motivate directors and KMP.

Although the basis of NED and executive remuneration are different (see explanations in Provision 7.1 and 7.2), their levels, however determined, should be sufficient and not excessive.

For NEDs, their remuneration should be sufficient to compensate them for their stewardship of the company. For EDs and KMP, it should be sufficient to compensate them for their long-term management of the company.

For EDs and KMP, the issue of fair remuneration is particularly important due to contemporary concerns about the growing perception of excessive levels of senior executive compensation. At the same time, the Board still needs to recognise that remuneration is a key factor in attracting, retaining and motivating the right talent.

B. Practice Guidance

• Practice Guidance 7: Level and Mix of Remuneration.

C. Related Rules and Regulations

• Nil.

D. CG Guides

• RC Guide 3.5: Determining Non-Executive Director Fees [Non-Executive Fees].
• RC Guide 4.2: Executive Remuneration Philosophy [Executive Remuneration].
• RC Guide 4.3: Executive Remuneration Components [Executive Remuneration].
• RC Guide 4.3: Executive Remuneration Levels [Executive Remuneration].
• RC Guide 4.5: Performance Measures [Executive Remuneration].
• RC Guide 4.6: Performance Targets [Executive Remuneration].
• RC Guide 4.7: Remuneration and Risk Alignment [Executive Remuneration].
• RC Guide Appendix 4C: Sample Remuneration Framework [Executive Remuneration].
• RC Guide Appendix 4G: Common Financial Performance Measures [Executive Remuneration].
• RC Guide Appendix 4H: Considerations in Adopting Profit Measures as Performance Measures [Executive Remuneration].
• RC Guide Appendix 4I: Framework for Setting Performance Goals [Executive Remuneration].
• RC Guide Appendix 4J: Mapping Remuneration and Risks [Executive Remuneration].
• RC Guide 5.4: Plan Design [Equity-Based Remuneration].
• Board Guide Appendix 5C: Duty to Act in Company’s Best Interests [Director Duties].

E. Related Articles

• ”Has pay-for-performance differentiation worked?” by Shai Ganu. (133KB)
• “The current state of play in director remuneration” Jon Robinson. (3.5MB)