Macquarie Warns It May Have To Scrap Compensation Plan

Post by NeilMc on November 17, 2009 · Under Business News, Company News, banking · Comment

Australian investment banking major, Macquarie Group, has warned that if its shareholders reject its compensation plan, it may be required to increase the cash portion of its bankers’ salaries.

Macquarie has proposed a compensation structure which would increase the proportion of its staff salaries received as equity rather than cash, so that the interest of its managers was more closely aligned with that of its shareholders.

Macquarie also scrapped its initial compensation proposal, which was to pay its top ten managers, including chief executive Nicholas Moore, using a larger number of stock options.

The investment banking group now proposes that it pay its top managers with shares that are issued after performance hurdles have been met, rather than options, after the government introduced new legislation regarding the taxation of employee stock options.

The compensation plan requires the approval of company shareholders, which Macquarie will seek at its annual general meeting, which will be held in Sydney next month.

“If the approvals sought by Macquarie are not obtained, Macquarie will need to consider other alternatives. This will likely result in higher cash payments to executives and reduced alignment with shareholders in at least the short-term. There could also be increased staff uncertainty regarding future remuneration arrangements, which may impact Macquarie’s ability to recruit and retain staff at a key time in the post economic downturn recovery.” The company said in a statement.

Macquarie had wanted to reform its compensation structure earlier in the year. But the company shelved its plans amid uncertainty over the taxation treatment of options, after the government introduced new regulations during the budget.

David Clarke, Macquarie chairman, said that performance based compensation, using company stock as currency, rather than the issuing of cash bonuses, gave more incentive to managers to create shareholder value.

“Macquarie’s approach to remuneration has been to align the interest of shareholders and staff over the short and long term. It has also been key in attracting and retaining quality staff. More specifically, Macquarie’s remuneration approach encourages staff to focus on earnings growth and return on equity over the medium and longer term while appropriately managing risk.” Mr. Clarke said.

Compare Australian Bank Account Deals