To the editor: October 2002

Tuesday, 01 October 2002


    Overcoming challenges can be fun too; If it looks like an option it probably is; Conference prize a hit.

    Overcoming challenges can be fun too

    Company Director magazine recently published a letter from the spouse of a director who lamented the lack of "fun" articles in our journal. It reminded me of a statement which I read in a previous issue and I have had a very pleasant time going back through my files to find it. Dr Trevor J. Bentley, in an article in the July issue, said "It is a greatly misunderstood or unrecognised truth that high personal and corporate values lead to vastly increased performance, particularly when personal and corporate values are aligned. In such instances, unfortunately all too rare, people enjoy their work, put more of themselves into it and perform at higher levels when their personal values are respected by the organisations that they work for." That comment would characterise my experience as a company director. The pleasure that I get from knowing that I am doing a difficult job, and doing it well, and from interactions both with my board colleagues and with the senior executives of the companies, far outweighs the pleasures that I would get from any of the entertaining or other perks mentioned in that letter.

    I must admit, as most of my experience is gained in the not-for-profit and government sector, that I do not get much wining and dining and my directors fees would not go far if I spent them on fast cars. The joy of watching a management team come to grips with a challenging issue, of supporting a CEO through a period of organisational change, of influencing the movement of an organisation towards sustainability, of building an empowering work environmentand creating value for customers and shareholders is far more lasting and satisfying than the tangible rewards, even though I do appreciate the fees and status associated with directorship. I appreciate a magazine that keeps me up-to-date on the development of issues that affect my ability to continue to my job well, to manage the risks associated with my chosen employment, and to be able to continue to experience the satisfaction of knowing that I add value to the organisations where I am a board member. Could I respectfully suggest that the dissatisfied spouse receives subscriptions to lifestyle and fast car magazines for Christmas so that we can get on with the serious business of enjoying professionalism in directorship?

    Julie Garland McLellan, associate director McLennan Magasanik Associates

    If it looks like an option it probably is

    With the much anticipated CLERP 9 on the table reiterating Australia's intentions to adopt the IASB's standard on expensing options and back it with law, the current debate raging around options and the implications for executive remuneration has been stirred up again. In our efforts to race and keep up with the United States in overhauling executive remuneration and associated accounting standards, we appear to have forgotten many companies are already well ahead of the game on this issue. Many commentators have already effectively laid the blame for the US corporate scandals and Australia's corporate collapses squarely at the door of executive options. This is without any attempt to justify this extremely serious and sweeping conclusion. In general, the debate shows a lack of understanding regarding the alternatives to options. Meanwhile, the risk/reward relationship provided by options has mostly been misrepresented. Not only is this reaction unlikely to serve the best interests of shareholders or companies in the long term, it is evidence that Australia has lost sight of the fact that our approach to the use of options in executive remuneration is much more sophisticated and conservative than the United States.

    As proof of this point, take a look at Europe's reaction to this debate. In particular, look at the UK, where you would be hard-pressed to find anything even remotely approaching the frenzied reaction taking place in Australia. This is a critical point, as the design of executive incentive plans in the UK is the closest in form to that being used in Australia. In fact, our UK colleagues seem to be quite bemused by Australia's reaction to this issue. For the most part, the debate has failed to recognise that Australian executives are paid much differently to those in the United States. In particular, there is a greater expectation in relation performance in exchange for options or other types of variable pay. The debate needs to look behind the terminology used to describe the so-called executive incentive plans (such as performance shares, deferred shares, restricted shares and performance rights) to understand what alternatives are available and how they compare to options. Most commonly you will find alternatives look and behave remarkably like an option.

    Chris Blake, partner PricewaterhouseCoopers Human Resource Consulting

    Conference prize a hit

    I attended my first AICD conference earlier this year on the Gold Coast. As well as enjoying an excellent conference I was very fortunate to win the lucky door prize at the conference dinner – a seven-night holiday in Thailand at the very opulent and exclusive resort: Chiva Som. My husband Gerard Hedditch and I visited Chiva Som in August and had a wonderful stay. The resort was everything the promotional literature and Linda Nicholls said it would be: simply fantastic. I recommend it highly to any directors needing to recharge their batteries or anyone who simply wants a great holiday where they will be very well looked after. Thank you to the individuals who were involved in the selection and negotiation of this prize. Jenny Da Rin, executive director Australian Made Campaign

    The 2003 conference will be held in Canberra from May 14-16. Registrations open soon. – Ed


    The purpose of this database is to provide a full-text record of all articles that have appeared in the CDJ since February 1997. It is aimed to assist in the research and reference process. The database has a full-text index and will enable articles to be easily retrieved.It should be noted that information contained in this database is in pre-publication format only - IT IS NOT THE FINAL PRINTED VERSION OF THE CDJ - therefore there might be slight discrepancies between the contents of this database and the printed CDJ.

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