life in the boardroom - mm-k.com · welcome and introduction by paul norris of mm&k 2015 survey...
TRANSCRIPT
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LIFE IN THE BOARDROOM BREAKFAST SEMINAR
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Agenda
Welcome and introduction by Paul Norris of MM&K
2015 Survey highlights and 2016 timetable by Jonathan Brigginshaw of MM&K
The evolution of the role of the chairman and NEDs and their relationship with executive management by Richard Moon
Forum led by Damien Knight of MM&K
Closing summary by Paul Norris
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Life in the BoardroomThe chairman and non-executive director survey
2015 survey highlights & 2016 timetable
Jonathan Brigginshaw
LIFE IN THE BOARDROOM BREAKFAST SEMINAR
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Life in the Boardroom Survey 2015
25th anniversary
285 participants
•133 chairmanships
•593 board appointments
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Market research April-May 2016
More than 200 responses
(up from 106 in 2015)
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What would you like to see? Ownership-specific
Extent of shareholder involvement / activism
Importance of ESG issues and burden of related disclosure
Growing compliance burden - red tape
Conformance with full governance code in AIM companies
Practice in achieving main market type disclosure
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What would you like to see? Ownership-specific
% time and cost of PE involvement in the Board and business
Tax-efficient exits for Founders
Ability/or not to raise extra capital
Mix of pay in NFP organisations vs commercial enterprises
Use of performance-related pay for top team in charities
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What would you like to see? General views
“Dimensions being brought together, eg: Organisation size / sector / geography / fees”
“Explore the issue of 'independence' as currently defined by the UK Corporate Governance Code. To what extent can it be meaningfully measured / does it help boards deliver shareholder value?”
“It’s very difficult to understand the drives in a company purely from ownership”
“It’s an excellent survey for a profession which needs to remain current”
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Topics you found less useful
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2015 survey findings
Fees
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Total fees vs turnover 2015
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Cumulative total fee increases 2005-2015
AIM
FTSE 100
FTSE 250
Small Cap
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Cumulative total fee increases 2005-2015
AIM
FTSE 250
FTSE 100
Small Cap
CHAIR
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Cumulative total fee increases 2005-2015
AIM
FTSE 250
FTSE 100
Small Cap
CHAIR
CEO Total Rem. Realised
CEOSalary
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Same-incumbent fee movements 2014-2015FTSE 100
Lower
QuartileMedian
Upper
Quartile
Chairman 0% 2% 7%
All NEDs 0% 4% 11%
FTSE 250Lower
QuartileMedian
Upper
Quartile
Chairman 0% 3% 7%
All NEDs 0% 4% 11%
Small CapLower
QuartileMedian
Upper
Quartile
Chairman 0% 1% 7%
All NEDs 0% 2% 8%
AIMLower
QuartileMedian
Upper
Quartile
Chairman 0% 0% 10%
All NEDs 0% 0% 16%
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Time commitments
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Rising governance demands – your views
“Too much time and even more energy is being
taken up by governance processes, leaving too
little time for conceptual thinking and strategy.”
“Some stability in regulation and legislation would be most welcome. Most NEDs need some
catch up time if we are to provide the support owed
to our companies.”
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Time commitments - Chairmen
£10m-£30m
£100m-£300m
£1,000m+
Turnover bands:
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Time commitments - NEDs
Turnover bands:
£10m-£30m
£100m-£300m
£1,000m+
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Do NEDs receive sufficient training to cope with rising governance demands?
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2016 timetable
23 June – EU referendum
July – Invitation to participate via email
Sept – Questionnaire submission deadline
December – Full report published
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The evolution of the role of the chairman and NEDs and their relationship with executive management
Richard Moon
LIFE IN THE BOARDROOM BREAKFAST SEMINAR
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Forum
Damien Knight
LIFE IN THE BOARDROOM BREAKFAST SEMINAR
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Format of forum
• Audience views on a number of subjects
• Short introduction to each subject
• I’ll pose some questions
• But please express whatever views you wish
• Chatham House rules
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Please introduce yourself by describing the ownership sector(s) in which you hold appointments
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Subjects
1. Evolution of NED role and reward
2. Executive pay simplification
3. Engaging with investors
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1. Evolution of NED role and reward
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Cumulative total fee increases 2005-2015
AIM
FTSE 250
FTSE 100
Small Cap
CHAIR
CEO Total Rem. Realised
CEOSalary
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Time commitments - NEDs
Turnover bands:
£10m-£30m
£100m-£300m
£1,000m+
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Questions
1. What is the experience of the audience in the changing demands of the role?
2. Is the existing board model still fit for purpose?
3. Despite the statistics from our survey, is there a growing gap between what NEDs are expected to do and how they are paid?
4. How could the fee model be improved?
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•2. Executive pay simplification
• Investment Association (ex ABI) Working Group initiated September 2015
• Members:
• Nigel Wilson, L&G Chairman
• Russell King, Rem Co chair, Aggreko and Spectris
• Helena Morrisey, CE0 Newton IM and Chair of IA
• Edmund Truell, Chairman Strategic Advisory Board of Lancashire and London Pensions Parnership
• David Tyler, Chairman, J Sainsbury and Hammerson
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Investment Association Working Group
• Started with 50-60 stakeholder interviews
• Produced an Interim Report in April
• Now conducting 20-25 round table discussions in May
• Final report “early summer”
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Interim Report
• The current approach to executive pay in UK listed companies is “not fit for purpose”. Poor alignment of interests between executives shareholders and the company
• Pay comparisons, remuneration consultants and plan complexity have driven disproportionate rises in executive pay
• Clear on some solutions:─ better reporting of incentive targets
─ better engagement of fund managers and companies remuneration committees should be more accountable
─ total fees to rem co advisers should be disclosed
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• LTIPs are seen as the main problem, but the Working Group is less clear on the structural solution, and so is consulting on alternative long-term alignment structures.
• Alternatives offered are:
─ Restricted shares (ie shares with no performance conditions)
─ Shares grants based on performance at grant (eg deferred bonus)
• Share options not mentioned! (common in AIM companies)
• Strong encouragement for flexibility:
─ Remuneration committee discretion to flex down or up!
─ Design of plan and choice of measures to fit company business and strategy
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Ironic situation:
─ Over-reliance on relative TSR LTIPs was encouraged by ABI “best practice”
─ Moving to fit for purpose design and measures will increase complexity and possibly lead to higher levels of performance payout.
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Questions
1. What does “fit for purpose” mean to you?
2. Is issuing restricted shares going to improve alignment?
3. What are your views on share options?
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3. Shareholder engagement
?
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Questions
1. How well is the dialogue going?
2. What are the barriers and how could the dialogue be improved?
3. How can trust be improved (both ways) between shareholders and non-executive directors?
4. Are there lessons that can be learned from each other by companies with different ownership models?
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LIFE IN THE BOARDROOM BREAKFAST SEMINAR