On 14 April 2020, ASIC announcedi changes to its regulatory work and priorities as a result of COVID-19. This included ASIC deferring some activities and redeploying staff to concentrate on issues of immediate concern, including maintaining the integrity of markets.
ASIC announced on 12 June 2020 in its Interim Corporate Plan for 2020-21 ii, five priorities to tackle the challenges presented by COVID-19. As part of its revised table of ongoing work (June 2020), ASIC has announced that one of its projects for Q2 2020, is that ASIC’s corporate governance team will be focusing on identifying good and poor corporate governance practices in large ASX listed companies and recommending improvements to raise corporate governance standards.iii
The focus on governance will involve monitoring changes in governance practices relevant to the current economic environment, including risk oversight, shareholder meetings, payment of dividends, executive pay and executive share trading.
ASIC will engage with companies and provide guidance, where appropriate, to avoid any adverse impacts on shareholders and other stakeholders.
ASIC has also released an information sheet (INFO Sheet 245) to assist boards with governance around executive variable pay decisions during COVID-19.
INFO Sheet 245 sets out guidance to support board oversight and the exercise of discretion on the variable pay outcomes (cash/equity) of senior executives in large listed companies. The guidance in INFO Sheet 245 is based on a review of remuneration governance practices across 21 ASX 100 companies, collectively with a market capital of $738 billion (as at 10 June 2020).
Importantly, decision making on variable pay – a key influencer of behaviour – can send strong signals to executives about conduct and performance that are consistent with the long-term interests of the company. It also signals to investors the type of performance and conduct that is being rewarded in the current environment.
ASIC Info Sheet 245
The information sheet focuses on:
1 The importance of a robust remuneration governance framework
Boards are facing challenges in the current environment in relation to decisions around executive variable remuneration, where companies are facing significant impact to their operations, employees and finances.
A robust remuneration governance framework is essential to support effective and informed board decision making relevant to the changing circumstances.
2 Specific factors for boards to consider when exercising discretion on executive variable pay in the current environment
More detail can be found in INFO Sheet 245.
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i ASIC Media Release 20-086
ii ASIC Media Release 20-131
iii ASIC’s revised timetable of ongoing work (June 2020) available at: https://asic.gov.au/regulatory-resources/find-a-document/regulatory-document-updates/asics-revised-timetable-of-ongoing-work/ (accessed 11 June 2020).
iv INFO Sheet 245 Board oversight of executive variable pay decisions during the COVD-19 pandemic (12 June 2020) available at https://asic.gov.au/regulatory-resources/find-a-document/information-sheets/ (accessed 12 June 2020)