AS CORPORATE governance has played an increasingly important role at the Australian board level, senior HR and remuneration professionals can make an important contribution to the debate within their organisations
AS CORPORATE governance has played an increasingly important role at the Australian board level, senior HR and remuneration professionals can make an important contribution to the debate within their organisations.
Speaking at a recent breakfast briefing sponsored by the Hay Group and organised by Human Resources magazine, Business Council of Australia CEO Katie Lahey said that heads of HR can play an important role in determining CEO and senior executive pay through remuneration committees.
She acknowledged that CEO pay was out of step with community views, but said there were a good number of reasons as to why CEOs and senior executives earned the amounts they did.
The talent pool for good CEOs was tiny compared to the broader market, for example. Additionally, given the need for specialist skills such as turnaround specialists, this put the market value for CEOs at a premium, she said.
Lahey said there were a number of dangers in getting it wrong with an incoming CEO, such as damage to the corporate brand and individual and company reputation. As such, she recommended that HR executives closely look at leadership skills of potential CEOs and establish links between business and recruitment strategies.
Also speaking at the breakfast was Graham O’Neill, past director of the Hay Group, who agreed that HR had an important role to play.
“One of the current necessities is that HR people who are involved with all aspects of remuneration – not just executive remuneration – need to be across governance requirements,” he said.
“They literally need to be considered alongside the accounting and finance people as being the expert internal resources regarding governance requirements for executive and other aspects of remuneration.”
O’Neill said it was vital that HR take an independent role in terms of the integrity of recommendations for CEO and executive remuneration. The processes by which any organisation attempts to comply really should be credible, defensible and transparent,” he said.
If a board wasn’t complying with the relevant sections of the Corporations Act or meeting ASX best practice guidelines, then he said HR should advise them with solid logical reasoning as to why a certain course of action doesn’t meet governance requirements, and caution against the potential governance risk associated with the action.
