8 November, 2018 | Category , ,

Of the 42 recent findings of the Cricket Australia (CA) cultural review, a couple have not received the level of attention of the more prominent headlines but this doesn’t mean they are any less important when looking at the core drivers of executive and employee behaviour.

Remuneration and incentives

Interestingly, there are some significant parallels in relation to remuneration and incentives that can be drawn between some of the CA review findings and the proposed fourth edition of the Principles and Recommendations put out by the ASX Corporate Governance Council earlier this year.  A couple of the more obvious include the following:

Executive remuneration should be aligned with values, culture & ethical behaviour

In relation to the first item, the draft Corporate Governance Principles point directly to the need for Boards to strike a balance on remuneration to ensure that incentives for executive directors and other senior executives encourage them to pursue the growth and success of the entity over the short, medium and longer term, without rewarding conduct that is contrary to the entity’s values or risk appetite. CA has not performed well here.

Recommendation 32 of the review findings states that CA’s performance reviews and bonus scheme(s) be harmonised so that all versions take into account ethical and behavioural considerations as the basis for potential reward.

Furthermore, recommendation 33 of the review findings states that executive remuneration should be linked to performance measures relating to the culture of CA and – to a lesser degree – to the culture of cricket-in-Australia.

Regular employee engagement and feedback is key to aligning behaviours with core values and culture

As good as these recommendations may sound on paper, these aspects of incentive measures can lead to ambiguity and subjective outcomes which prove challenging for Boards to measure – and measurable outcomes are critical to effective performance reviews.

Our view is that more regular engagement with employees to provide feedback loops to address and adjust behaviours in relation to core values and the desired culture of the business are often more impactful.  With the help of capable leaders, this regular engagement and feedback cadence helps to embed the core values.

On the second item above, listed entity disclosure around remuneration policies and practices provides transparency to stakeholders about measures the entity has put in place to drive behaviour and reward employees.  As a result, stakeholders get the opportunity to engage with companies at Annual General Meetings from an informed basis, which in turn helps to drive more accountable behaviour from Boards.

Perhaps CA could take a leaf of the listed company world on this – particularly given many of the players are highly remunerated with bonuses and incentive linked to performance?  Additional transparency around the performance drivers that are in place may provide stakeholders with welcome visibility and confidence that the Board has this under control.

Final thoughts

The CA findings reinforce the need for executive and employee’s remuneration and incentives to form part of a well-constructed remuneration policy and set of practices that is set by the Board.  If you are in a senior leadership position within, or on the Board of, an emerging growth business and would like to understand more about “remuneration and incentives” and how to strategically establish and embed these to help drive high performance, get in touch with us here at Checkside.

Share

New call-to-action