The problem when it comes to executive remuneration, explains Margot Saville in her account of Friday’s Leighton Holdings AGM today, is that we’re suffering from Lizard Brain.
We’ll let Saville explain:
US-based neuroscientist Dr Peter Whybrow, in his book American Mania, theorises that the human brain has evolved over hundreds of thousands of years in an environment defined by scarcity. This means that our brains have a reptilian core which is set up to acquire “as much as we can of things such as s-x, safety and food.”
Continually rewarding the “lizard core”, such as paying massive bonuses to executives for simply doing their job, weakens the other, more-evolved parts of the brain which oversee social interaction and self-regulation, he says. In other words, if you had spent years getting paid a motza, wouldn’t you find it hard to turn it down?
But given that amendments to the Corporations Act passed in February now allow a board to be spilled if the remuneration report receives “no” votes of 25 per cent or more at two consecutive annual general meetings, shareholder anger over the motza that under performing executives have been taking for granted is suddenly being expressed in hefty pay cuts. In the end, the Leighton board avoided its first strike under the new rules and declined to pay up when it came to outgoing executives Wal King and David Stewart’s grossly undeserved bonuses, with Stephen Johns saying that “we are not in the business of providing largesse.”
This week, shareholder anger is set to crystallise at the upcoming BlueScope Steel and Channel Seven AGM. Pacific Brands has already earned a strike this season, as has GUD. The two strikes rule is a game changer, and one that’s certainly adding a certain frisson to this year’s AGM season.