2010 Board of Directors Study Australia and New Zealand
Š 2010 Korn/Ferry International
Contents Table of contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 About Korn/Ferry International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 About Egan Associates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Editorial comment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Information and interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Non Executive Chairmen and Non Executive Directors fees . . . . . . . . . . 11 Australia Board demographics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Australia Board committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Australia Non Executive Chairmen and Non Executive Directors fees . . . . . . . . . . 22 New Zealand Board demographics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 New Zealand Board committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 New Zealand
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About Korn/Ferry International Since our founding in 1969, Korn/Ferry International has been the executive recruitment industry’s leader and innovator, and today has evolved as the world’s premier provider of talent management solutions. More companies around the world trust Korn/Ferry than any other firm to deliver and develop the best executives to run their organisations, a responsibility we take seriously and work every day to meet with integrity and results. Our executive recruitment professionals conduct more than 10,000 senior-level searches for clients worldwide each year. From our nearly 80 offices in 40 countries, we ensure that our clients have access to the most qualified candidates for every position. With the business community now facing many more challenges in attracting, developing and retaining talent, Korn/Ferry’s services also include a full suite of leadership and talent consulting offerings, as well as talent acquisition solutions. Korn/Ferry International’s Global Board & CEO Services team has embraced this change driving the appointments of hundreds of new directors while utilising our Chief Executive Institute. Developing world-class organisations is an ongoing process, and crucial to maintaining an organisation’s competitive advantage. Korn/Ferry’s Leadership and Talent Consulting business goes beyond executive search by delivering sophisticated talent and organisational strategies to optimise performance including succession planning. Level 20, 60 Castlereagh Street Sydney NSW 2000 Australia Telephone +612 9006 3400 Facsimile +612 9006 3600
Level 43, 120 Collins Street Melbourne VIC 3000 Australia Telephone +613 9631 0300 Facsimile +613 9650 9161
Level 5, 1 Woodward Street Wellington New Zealand Telephone +644 460 4900 Facsimile +644 460 4901
Level 2, 14 Viaduct Harbour Ave Auckland New Zealand Telephone +649 309 4900 Facsimile +649 309 4904
For more information, call Robert Webster, Senior Client Partner and Head of the Australasian Board Services Practice, on +612 9006 3444 or Suzanne Williams, Senior Client Partner, Australasian Board Services Practice, on +612 9006 3428 or visit www.kornferry.com.
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About Egan Associates Egan Associates provides advice in Australia and New Zealand to boards and chief executives of leading organisations, to mid market and entrepreneurial enterprises across all sectors and to government. John Egan has provided advice to some of the largest organisations in the region since 1975. John Egan and the firm’s principals have well developed long term affiliations with leaders within both the public and private sectors. Egan Associates maintains a comprehensive Director and Senior Executive remuneration database for Australia and New Zealand and draws on international resources where necessary. Our clients extend across the complete breadth of the market from leading public companies, those preparing for listing, private and international corporations, government and related corporatised entities, as well as innovative enterprises. Egan Associates acts as an independent adviser to boards and additionally provides advisory services to an extensive range of companies on Non Executive Directors’ emoluments, CEO and Executive reward, including both annual and long term incentive programs. Increasingly, Egan Associates is engaged in the provision of advice on strategic and corporate governance issues, preparation of explanatory notes for annual general meetings and company remuneration reports for shareholder review, as well as attesting to the reasonableness of CEO and Executive Director reward arrangements. Details of our services can be reviewed on the company’s website. Level 16, 6 O’Connell Street Sydney NSW 2000 Australia Telephone: +612 9225 3225 Facsimile: +612 9225 3235
GPO Box 4130 Sydney NSW 2001 Australia
For more information, visit Egan Associates’ website www.eganassociates.com.au or call John Egan or Lianne Hooper on +612 9225 3225.
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Preface This year we have focused on the continuing challenge for boards of CEO succession planning and we outline the leading role Korn/Ferry International has taken globally in providing our clients with the expertise to assess and develop their internal talent. The enhanced role and responsibility of board remuneration committees under new ASX listing rules is a major topic of discussion, particularly as some boards have come under real pressure to substantiate and justify their Remuneration Reports at annual meetings. The size of boards, the selection of NEDs, and the role played by the board nomination committee, particularly in relation to gender diversity, is also discussed. Korn/Ferry International and Egan Associates are pleased to collaborate on these important issues and to bring our collective expertise together for the benefit of our clients. Our 2010 Board of Directors Study has been published following another year of progress and changes in our boardrooms. We trust that you and your board will find it stimulating and helpful in your deliberations on these important issues.
Gary Reidy Managing Director, Australasia Korn/Ferry International
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John Egan Chairman Egan Associates
Introduction CEO and leadership succession continues to be a hot topic around the boardrooms of corporate Australia according to a survey conducted by Korn/Ferry International where almost 80 percent of respondents felt that succession was a leading concern for their organisations. The nature of this concern was expressed in various terms: > > > >
inability to keep successors engaged and in the pipeline inability to accurately anticipate (or manage) the timing of succession specific skills shortage in senior leaders, notably a lack of deep and broad operational experience an acknowledgement that the CEO role is getting harder and that preparing people for the unique demands of this role is increasingly challenging
Yet despite the gravity of these concerns and their impact on the sustainability of business performance, almost one third of respondents believed that the level of board oversight of the succession process was “somewhat poor”. The reality in many organisations is that succession is still treated as an event and not a process. While one respondent insightfully noted that “It’s the hardest game of chess you will ever play”, it appears that too many boards fail to appreciate that succession is not merely a transaction, rather it is a systemic organisational change that is deeply rooted in strategy, vision and culture and necessarily impacts every talent management process within the business. The consequence for organisations that are more reactionary in their response to succession and unplanned vacancy issues is that they are likely to be limited in choice for top executive talent and as a result place long term shareholder value at risk. There are, of course, many examples of sound succession practices. So what are we observing in the organisations that are getting succession right? A succession mindset is inculcated and linked to strategy. Those organisations that are able to identify the key leadership capabilities that they need in order to achieve their organisational strategy and orientate their leadership development investment around these capabilities are better placed to achieve stronger talent pipelines. Too often we see the opposite, where organisations continue to invest heavily in leadership development initiatives that are not anchored in the strategic imperatives of the business and are therefore not critical to future success. Good succession planning is a key component of risk management. Boards who appreciate the direct correlation between external stakeholder and investor confidence and the perceived depth of succession elevate the importance of systemic succession management.
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Succession management is data driven. There is an art and science to good succession planning. The robust assessment of executive talent including the objective evaluation of both performance and potential injects a necessary degree of rigour in what is too often an arbitrary process reliant upon subjective judgments founded in observation of past performance. Identify the critical career experiences that develop leadership competency. Preparation for mission critical roles requires exposure to foundational career experiences. Organisations that identify and prioritise key assignments and roles for future leaders maximise stretch opportunities and the ability to build strategically relevant leadership competency. Identify true high potential early. Research proves that almost 30 percent of “high performers” are not in fact “high potential”. Strong future leaders are highly “learning agile” and by identifying and measuring those factors that are linked with success in new and challenging situations, organisations are able to identify high potential talent with confidence. Data from our recent survey revealed that almost one quarter of respondent organisations did not have a systematic way of identifying high potential executives. Develop leaders from the “inside out”. Cutting edge leadership development goes beyond technical and managerial content to focus on the personal, interpersonal and organisational context. These attributes are typically in short supply because they are not easy to acquire and take time to refine. Development initiatives deal with the whole person and must be high touch, high impact and custom designed to address: > > >
leading self and the demonstration of personal flexibility leading others – getting work done through others and command skills leading the organisation – inspiring others, driving change and enabling innovation.
Korn/Ferry International’s Leadership and Talent Consulting practice is dedicated to working with Boards on a range of succession management issues, including the alignment of succession planning processes to organisational strategy, early identification of high potential, the objective assessment of individuals utilising research validated and externally benchmarked instruments and the custom design of high impact leadership development programs.
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Editorial comment Challenges of boards and board remuneration committees With the impact of the global financial crisis still being felt, many companies did not adjust board fees in 2009 even where they had capacity within pre approved fee pools. In 2010 however many boards have found it prudent to make fee adjustments either because they held back in 2009 or because they believed a modest increase would be more palatable now than a larger catch up increase in the future. On average the increase in Chairman fees over 2010 has been around 1.8 percent and for Non Executive Director fees, 3.9 percent. During the last 12 months Directors have received various signals which highlight the increased stringency in governance and corporate regulation of remuneration in particular arising from the G20 responses to the global financial crisis. In Australia and New Zealand, those signals have been reinforced by particular initiatives taken by the ASX and NZSX in response to global regulatory and legislative changes; changes to Listing Rules relating to trading windows and the independence of remuneration committees being two examples in the Australian market. While boards are dealing with the financial crisis and its impact on bottom lines and shareholder value, a real hot spot in the committee room has become the role of Chairman of the remuneration committee. The role and independence of this committee continues to grow with increased scrutiny and shareholder input. Whilst neither Australia nor New Zealand has had to appoint a pay czar (as in the US) and their financial institutions have demonstrated considerable strength by global standards (and therefore avoided much of the impact of additional regulatory control), the level of examination of remuneration issues has taken on a forensic character as distinct from an historical light touch. While boards might not be meeting more often, except in circumstances where they have had to address capital restructuring or debt refinancing, we have observed that the frequency of meetings and/or time commitment of many committees have increased. This is particularly the case for risk management and remuneration committees. The latter is in response to both government initiated enquiries and increasingly negative votes in respect of company remuneration reports, often sponsored by proxy advisors. With new ASX listing rules coming into force from July 2011, requiring all Top 300 Listed Entities in Australia to have a remuneration committee comprised solely of Non Executive Directors, we will see even more attention being given to the makeup of remuneration committees and to their decisions.
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Changes in the structure of boards There is also much discussion about the need to separate the nomination and remuneration committees of a board with more focused attention being given to board renewal. Nomination committees are increasingly addressing the key issues of board effectiveness, such as the suitability of current board members, the issues of board diversity (the gender factor) and the breadth of skills required of Directors as more Australian and New Zealand companies expand their businesses offshore. While there has been an observable trend over the last 12 months for smaller companies to increase the proportion of Non Executive Directors, there have been significant shifts in the composition of boards in two sectors which were lagging behind others in terms of board size and the proportion of Non Executive Directors. The IT sector which previously had the lowest proportion of Non Executive Directors, 62.5 percent in 2009, increased its proportion of Non Executive Directors to 72 percent in 2010, while companies in the telecommunications sector also increased their proportion of Non Executive Directors in one year from 73.3 percent to 80 percent. The other trend we have observed is a move away from large boards to a more manageable size of between six and nine Directors. 48 percent of ASX Top 50 Companies now have between eight and nine Directors, up from 36 percent in 2009. The ASX has also placed an additional requirement on boards to address the issue of diversity of board structures by virtue of their Corporate Governance Principles and Recommendations. The Recommendations require boards to establish a policy concerning gender diversity and to disclose that policy by 2011. The policy should include the requirement for the board to establish measurable objectives for achieving gender diversity and for the board to annually assess both the actual objectives and progress towards achieving them. Boards will be required to disclose the proportion of women employees in the organisation, the proportion of women in senior executive roles and the number of women on boards. The 2010 data shows the continued domination of males in both Chairman and Non Executive Director roles and whilst the recent Australian hurdle of ten percent of Non Executive Director roles being held by women was heralded as significant, it really only highlights the distance to go in achieving the gender representation being proposed in both Australia and New Zealand.
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Information and interpretation This 2010 Study has been compiled by Egan Associates from an analysis of published information from annual reports (through to end of 2009) of leading companies in Australia and New Zealand.
Information and interpretation The number of Australian companies included in this Study is 300 while the number of New Zealand companies is 50. For this 2010 Study the revenue ranges and market capitalisation ranges for Australian and New Zealand companies continue to reflect those adopted in prior years, though the constituents in these groups of companies will vary in accordance with individual corporate circumstances, as will the constituents in ranked companies. Revenue and market capitalisation ranges (Australia and New Zealand) 2010
Greater than $10 billion $5 - $10 billion $2 - $5 billion $500 million - $2 billion $200 - $500 million Less than $200 million Revenue and market capitalisation ranks (Australia) 2010
Of the Top 300 companies: Top 50 Second 50 Top 100 Top 100 - 200 Top 200 - 300 Revenue and market capitalisation ranks (New Zealand) 2010
Of the Top 50 companies: Top 10 Top 10 - 25 Top 25 - 50 The fees analysis includes base or retainer fees, committee fees and disclosed contributions to Directors’ retirement, including mandatory contributions under the Australian Superannuation Guarantee legislation. In the aggregate fees we also incorporate voluntary or mandatory setting aside of fees for the purpose of acquiring shares in a company, though exclude disclosed retirement benefit accruals.
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While data is based on that reported in respect of financial years ending 31 December 2009, the market capitalisation ranking adopted in this Study has been determined as at 30 June 2010 with a 22-day smoothing applied.
Profile of participating organisations The list of 350 organisations, Top 300 Australian companies and Top 50 New Zealand companies from which data has been drawn, is appended. The analysis is restricted to the Top 300 Australian and Top 50 New Zealand companies by market capitalisation as at 30 June 2010 with 22-day smoothing applied, and excludes property trusts, funds, overseasbased companies and subsidiaries.
Table 1
Profile of Australia leading companies Australian leading companies
2010 average A$
Count #
Market capitalisation*: Top 300 Companies
3,804,214,238
300
3,235,890,596
18%
Market capitalisation: Top 50 Companies
18,140,891,600
50
15,660,862,540
16%
Operating revenue: Top 300 Companies
2,724,442,600
300
2,722,993,747
0%
Operating revenue: Top 50 Companies
12,235,485,250
50
11,975,151,220
2%
Total assets: Top 300 Companies
12,505,043,923
300
11,708,010,535
7%
Total assets: Top 50 Companies
67,466,617,155
50
61,998,204,732
9%
271,330,197
300
309,995,501
-12%
1,460,708,826
50
1,594,268,192
-8%
Operating profit: Top 300 Companies Operating profit: Top 50 Companies
2009 average % A$ Change
* Market capitalisation as at 30 June 2010 and 30 June 2009 respectively
Table 2
Profile of New Zealand leading companies New Zealand leading companies
2010 Average NZ$
Count #
2009 Average % NZ$ Change
Market capitalisation*: Top 50 Companies
792,170,250
50
769,965,659
3%
Operating revenue: Top 50 Companies
843,516,920
50
830,627,040
2%
Total assets: Top 50 Companies
1,290,873,320
50
1,281,375,140
1%
Operating profit: Top 50 Companies
31,862,775
50
90,999,060
-65%
* Market capitalisation as at 30 June 2010 and 30 June 2009 respectively
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Australia: Non Executive Chairmen and Non Executive Directors’ fees Australian leading companies ranked by revenue Non Executive Chairmen’s fees have been analysed according to company size, that is by revenue and market capitalisation. Of the Top 300 Australian companies, we have been able to include 221 Non Executive Chairmen (we exclude overseas-based incumbents, executive Chairmen and those incumbents who only served a part year). Table 3 reveals that the average fee payable to a Chairman in the Top 300 Australian companies stood at $241,687, at the median $174,000 and at the 75th percentile $326,000. Non Executive Directors’ fees among the same organisations on average stood at $124,985, at the median $102,500 and at the 75th percentile $158,642. The average fee payable to a Non Executive Chairman varied according to organisation scale. Among those companies with revenues of less than $200 million the Chairman’s fee on average stood at $119,892, whereas among companies with revenues greater than $10 billion the average fee was $666,663. The median Chairman fees among the smallest companies stood at $107,506, whereas among the largest in revenue terms stood at $611,738. At the 75th percentile the variance was from $150,000 to $742,000. In grouping companies within revenue clusters, taking the Top 50, Second 50, Top 100, then those companies ranked in revenue terms between the Top 100 and 200 and the Top 200 and 300 reveals similar dispersion in relation to fees payable to Chairmen and Non Executive Directors. The highest paid Non Executive Directors, including Chairmen, are in companies with the most substantial revenues and the least well paid being in those organisations ranked below the ASX Top 200.
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Table 3
Non Executive Chairmen and Non Executive Directors’ fees in Australian leading companies by revenue Top 300 Companies by revenue Average Median A$ A$
75th percentile A$
25th percentile A$
Sample #
Total sample Chairman
241,687
174,000
326,000
117,500
221
Non Executive Director
124,985
102,500
158,642
72,540
1,017
Revenue ranges greater than $10 billion
Chairman
666,663
611,738
742,000
583,762
15
Non Executive Director
267,177
275,930
312,374
232,937
87
Chairman
452,293
435,000
508,000
400,000
13
Non Executive Director
194,312
189,800
228,900
153,000
57
Chairman
332,327
348,038
395,757
265,934
30
Non Executive Director
151,599
143,900
185,000
122,171
153
Revenue ranges $5 - $10 billion
Revenue ranges $2 - $5 billion
Revenue ranges $500 million - $2 billion
Chairman
246,170
217,066
304,500
164,500
51
Non Executive Director
122,890
114,450
146,857
87,000
257
Revenue ranges $200 million - $500 million
Chairman
163,799
152,920
191,676
137,950
36
Non Executive Director
93,890
87,500
103,834
75,300
177
Revenue ranges Less than $200 million
Chairman
119,892
107,506
150,000
75,975
76
Non Executive Director
70,225
63,260
84,992
50,000
286
Revenue ranked Top 50 Companies
Chairman
482,468
447,445
601,000
346,075
45
Non Executive Director
216,662
203,163
268,526
152,939
227
Revenue Ranked Second Top 50 Companies Chairman
274,168
257,904
361,736
181,688
38
Non Executive Director
129,980
121,892
163,938
95,000
194
Revenue ranked Top 100 Companies
Chairman
387,101
360,690
472,087
247,359
83
Non Executive Director
176,718
160,410
216,675
120,000
421
Revenue ranked Top 100 - 200 Companies Chairman
192,554
162,913
217,050
140,218
70
Non Executive Director
103,164
91,151
114,905
76,763
343
Revenue Ranked Top 200 - 300 Companies Chairman
114,773
104,271
143,097
74,000
68
Non Executive Director
68,484
61,720
82,182
48,142
253
NB: Non Executive Director exclude Chairmen
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Australian leading companies by market capitalisation Australia’s largest companies by market capitalisation (Table 4) reveal an average Chairman’s fee of $633,163, at the median $611,738 and at the 75th percentile $713,899. For those companies with a market capitalisation between $200 and $500 million the average Chairman’s fee stood at $127,396, at the median $115,723 and at the 75th percentile $153,060. Among the Top 50 the average chairman’s fee stood at $519,306, at the median $478,158 and at the 75th percentile $611,738. Among the Top 200 to Top 300 companies the average chairman’s fee stood at $132,619, at the median $119,950 and at the 75th percentile $153,989. For Non Executive Directors the average fee for a Director serving on a company with a market capitalisation in excess of $10 billion stood at $267,177, at the median $261,506 and at the 75th percentile $302,010. For those Directors serving on boards of companies with a market capitalisation between $200 and $500 million the average fee was $77,251, at the median $71,346 and at the 75th percentile $91,388. In the most populous group, that is those with a market capitalisation between $500 million and $2 billion, the average Director’s fee stood at $100,660, at the median $96,578 and at the 75th percentile $120,000. Among the Top 50 the average Director’s fee stood at $226,955, at the median $212,887 and at the 75th percentile $271,420. Among the Top 200 and Top 300 companies the average Director’s fee was $78,421, at the median $73,981 and at the 75th percentile $93,075.
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Table 4
Non Executive Chairmen and Non Executive Directors’ fees in Australian leading companies by market capitalisation Top 300 Companies Average Median by market capitalisation A$ A$
75th percentile A$
25th percentile A$
Sample #
Total sample Chairman
241,687
174,000
326,000
117,500
221
Non Executive Director
124,985
102,500
158,642
72,540
1,017
Market capitalisation ranges greater than $10 billion Chairman
633,163
611,738
713,899
480,742
17
Non Executive Director
267,177
261,506
302,010
215,691
100
Market capitalisation ranges $5 - $10 billion Chairman
491,678
480,700
583,762
409,062
11
Non Executive Director
200,902
189,900
229,359
169,354
70
Chairman
316,642
343,463
414,637
191,500
40
Non Executive Director
148,334
144,334
185,536
111,078
184
Market capitalisation ranges $2 - $5 billion
Market capitalisation ranges $500 million - $2 billion Chairman
197,030
190,000
235,000
147,437
73
Non Executive Director
100,660
96,578
120,000
77,672
334
Chairman
127,396
115,723
153,060
84,530
80
Non Executive Director
77,251
71,346
91,388
57,008
329
Market capitalisation ranges $200 - $500 million
Market capitalisation ranked Top 50 Companies
Chairman
519,306
478,158
611,738
420,000
41
Non Executive Director
226,955
212,887
271,420
181,387
222
Market capitalisation ranked second Top 50 Companies
Chairman
265,524
262,418
347,519
172,256
38
Non Executive Director
123,910
123,698
147,900
90,844
196
Market capitalisation ranked Top 100 Companies
Chairman
397,234
369,008
480,721
248,288
79
Non Executive Director
178,637
169,674
220,659
117,175
418
Market capitalisation ranked Top 100 -200 Companies Chairman Non Executive Director
175,854
162,913
219,338
109,250
74
95,717
90,072
116,863
71,375
316
Market capitalisation ranked Top 200 -300 Companies
Chairman
132,619
119,950
153,989
86,872
68
Non Executive Director
78,421
73,981
93,075
58,043
283
NB: Non Executive Directors exclude Chairmen
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0
0
0
0
0
0
Australia: Board demographics Board composition - Executive v Non Executive Directors The 2010 Study demonstrates the continued prevalence of Non Executive Directors serving on the boards of Australia’s leading companies. Chart 1 shows that the composition of the board for the Total Top 300 Sample is 77 percent Non Executive Directors and 23 percent Executive Executive directors Non-executive directors Directors and the Top 50 sample shows that the boards comprise 50 percent Executive Directors. 82 percent Non Executive Directors and 18
The ability to become a strategic partner to Chart 2 shows that the proportion of Non40Executive Directors is the CEO and develop 84 percent for companies with revenue greater than $10 billion and in-depth knowledge 30 than $200 million. Inof the business is not 71 percent for companies with revenue less simply desireable but general terms, larger companies are more likely to have a greater mandatory for success proportion of Non Executive Directors on20 their boards. as a CFO.
10 When analysed by GICS Sector (Chart 3), Utilities companies have the highest proportion of Non Executive Directors (89 percent) whereas 0 ASX top 300 ASX top 50has the lowest proportion Information Technology of Non Executive Directors serving on their boards (72 percent).
Chart 1
Proportion of Directors for Top 300 and Top 50 100% 82%
77%
23%
0%
Top 300
Executive Directors Non Executive Directors
18%
Top 50
15
in-depth knowledge of the business is not simply desireable but mandatory for success as a CFO.
$500 m-$2 bn $200-$500 m <$200m
Consumer discretionary
Non executive directors
Consumer staple Chart 2
Executive directors
Proportion of directors by revenue Energy Financials
>$10 bn Health care $5-$10 bn Industrials $2-$5 bntech Info $500 m-$2 bn Materials Telecoms $200-$500 m
16%
Non Executive Directors
84% 18%
Executive Directors The ability to become a strategic partner to the CEO and develop in-depth knowledge of the business is not simply desireable but mandatory for success as a CFO.
82% 21% 79% 19% 81% 21% 79% 29%
Utilities <$200m
71%
0%
100%
Chart 3
Proportion of directors by GICS sector Consumer discretionary Consumer staple
23% 77% 19%
73% 82% 23%
77% 28%
Info tech
26%
Materials
72% 74%
20%
Telecoms
16
77%
23%
Industrials
0%
Executive Directors
18%
Health care
Utilities
81%
27%
Energy Financials
Non Executive Directors
80% 11% 89% 100%
Distribution of board size â&#x20AC;&#x201C; all Directors (Executive and Non Executive) Board size is analysed according to Revenue and then by GICS sector, adopting the following seven categories: > > > > > > >
less than four Directors; four to five; six to seven; eight to nine; ten to 11; 12 to 13; greater than 13.
Table 5 shows the number of Directors serving on the boards of the Top 300 companies and those for the Top 50 companies ranked by Revenue. Further analysis is provided on companies by industry sector. Most (89 percent) of the Total Sample have between four and nine Directors and eight percent have boards with ten or more Directors. Only three percent of the total sample have fewer than four Directors, all of which are on boards of companies with less than $500 million in annual revenue. Among the Top 50 ASX listed companies only one board has less than six Directors and 88 percent have between six and 11 Directors, with ten percent having more than 11 Directors. Indicatively, if revenue is a guide to company scale, larger companies have greater numbers of Directors than do smaller companies. As the data indicates, 84 percent of companies with revenues of less than $200 million have seven or fewer Directors, 78 percent of companies with revenues between $200 million and $500 million have seven or fewer Directors, whereas no board of companies over $10 billion has less than seven Directors. All but four companies over $5 billion have at least eight Directors. The industry sector data contains companies of varying size within each GICS category. Variations in the data are partly impacted by sample size. 84 percent of Consumer Staple boards have between six and nine Directors, but only 48 percent of Energy boards have between six and nine Directors. Information Technology boards are increasing in size, 54 percent have between six and nine Directors, with 45 percent still having four to five Directors.
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Table 5
Distribution of board sizeâ&#x20AC;&#x201D;all Directors (including Chairman, Executive and Non Executive)
< 4 Directors
4 - 5 Directors
6 - 7 Directors
8 - 9 Directors
10 - 11 Directors
12 - 13 Directors
> 13 Directors
# %
# %
# %
# %
# %
# %
# %
#
Top 300 Companies
9 3%
80 27%
122 41%
64 21%
19 6%
3 1%
3 1%
300
Top 50 Companies
0 0%
1 2%
8 16%
24 48%
12 24%
2 4%
3 6%
50
0 0%
0 0%
0 0%
7 37%
8 42%
1 5%
3 16%
19
Sample
Revenue ranges Greater than $10 billion $5 - $10 billion
0 0%
1 8%
3 23%
5 38%
4 31%
0 0%
0 0%
13
$2 - $5 billion
0 0%
1 3%
12 34%
16 46%
5 14%
1 3%
0 0%
35
$500 million - $2 billion
0 0%
7 10%
40 60%
19 28%
1 2%
0 0%
0 0%
67
$200 - $500 million
1 2%
15 28%
26 48%
10 18%
1 2%
1 2%
0 0%
54
Less than $200 million
8 7%
56 50%
41 37%
7 6%
0 0%
0 0%
0 0%
112
Consumer discretionary
0 0%
10 24%
17 41%
10 24%
3 7%
1 2%
0 0%
41
Consumer staple
0 0%
1 8%
5 42%
5 42%
1 8%
0 0%
0 0%
12
GICS sector
Energy
2 7%
12 41%
9 31%
5 17%
1 3%
0 0%
0 0%
29
Financials
3 6%
7 13%
18 33%
16 30%
8 15%
2 4%
0 0%
54
Health Care
0 0%
5 28%
11 61%
2 11%
0 0%
0 0%
0 0%
18
Industrials
1 2%
8 16%
26 52%
13 26%
1 2%
0 0%
1 2%
50
Information technology
0 0%
5 45%
4 36%
2 18%
0 0%
0 0%
0 0%
11
Materials
3 4%
30 42%
27 38%
6 8%
4 6%
0 0%
2 3%
72
Telecommunication services 0 0%
1 20%
2 40%
1 20%
1 20%
0 0%
0 0%
5
Utilities
1 13%
3 38%
4 50%
0 0%
0 0%
0 0%
8
18
0 0%
100
Male
The ability to become a strategic partner to the CEO and develop in-depth knowledge 60 of the business is not simply desireable but Board composition by gender â&#x20AC;&#x201C; Non Executive Directors 40 mandatory for success Charts 4 and 5 highlight the fact that males hold the overwhelming as a CFO. 80
Female
majority of non executive director positions on leading company boards. 20 The data also reveals that 97.7 percent of non executive chairmen across 0 our entire sample are males. This is also reflected in the Top 50 Non executive directors Non executive chairman companies. For director roles, within our total sample females occupied 9.6 percent of board positions, though among the Top 50 companies, 16.3 percent of non executive directors were female.
Chart 4
Board composition by gender for Top 300 100 97.7%
100%
90.4%
80
Male Male Female Female
60 40
The ability to become a strategic partner to the CEO and develop in-depth knowledge of the business is not simply desireable but mandatory for success as a CFO.
20 0 0%
9.6% Non executive directors
Non2.3% executive chairman
Non Executive Directors Non Executive Chairmen
Chart 5
Board composition by gender for Top 50 95.8%
100% 83.7%
Male Female
16.3% 4.2% 0%
Non Executive Directors Non Executive Chairmen
19
Board comparison by age â&#x20AC;&#x201C; Non Executive Directors and Chairmen It should be noted that not all Directors in the sample disclosed their age. Where Directors ages were disclosed the average age stood at 60 years and at the median 61 years (Table 6). Among those companies with revenues greater than $10 billion, the average age of Non Executive Directors is 61 years and the median age is 62 years. Those companies with revenues less than $500 million have an average Non Executive Director age of 58 years and a median of 59 years.
Table 6
Age of Chairmen and Non Executive Directors in Australian Top 300 Companies Top 300 Companies Average Median Total sample Revenue ranges
20
75th percentile
25th Sample percentile #
60
61
65
55
1,285
Greater than $10 billion
61
62
65
56
159
$5 - $10 billion
62
63
66
58
87
$2 - $5 billion
60
61
65
57
194
$500 million - $2 billion
61
61
66
56
303
$200 - $500 million
58
59
64
54
217
Less than $200 million
58
59
65
53
325
Australia: Board committees Committees have been grouped according to similarity of function. Our analysis shows that companies use a variety of titles for committees as noted in Table 7. “Other” includes Review; Conduct; Industry Specific; Marketing; Management; Planning; Strategy; Special Board Meetings; Merger/ Acquisition; Resources and Restructure committees, as well as infrequently occurring committees such as Donations and Conduct. For the Total Sample 27 percent have an “Other” committee and for the Top 50, 64 percent.
Distribution of committee types Table 7 shows that 97 percent of the Top 300 and 100 percent of the Top 50 have an Audit Committee, and 89 percent of the Top 300 and 100 percent of the Top 50 have a Remuneration Committee. With regard to Nomination committees, 30 percent of the Top 300 and 64 percent of the Top 50 have this committee.
Table 7
Distribution of core committees in Australian leading companies Committee
Top 300
Top 300
Top 50
Top 50
#
%
#
%
290
97%
50
100%
Compliance 2
11
4%
5
10%
Corporate governance
15
5%
4
8%
Nominations
89
30%
32
64%
Occupational health & safety 4
45
15%
13
26%
Other 5
82
27%
32
64%
Remuneration
268
89%
50
100%
Risk
57
19%
21
42%
Audit 1
3
6
7
1 Includes: stand alone Audit Committee, Audit & Compliance Committee, Audit Compliance & Risk Committee and an Audit & Risk Committee. 2 Stand alone Compliance Committee. 3 Stand alone Nomination Committee. 4 Includes: stand alone OH/S Committee, OH/S & Environment Committee and a standalone Environment Committee. 5 All other committee types. 6 Includes: stand alone Remuneration Committee, Remuneration & Nominations Committee and Remuneration & HR Committee. 7 Includes stand alone Risk Committee, Finance Committee and Risk & Investment Committee.
21
New Zealand: Non Executive Chairmen and Non Executive Directorsâ&#x20AC;&#x2122; fees New Zealand leading companies ranked by revenue The analysis of New Zealand companies has been compiled in New Zealand dollars. Table 8 sets out the fees paid to Non Executive Chairmen among leading New Zealand companies. It will be noted that the average fee stood at NZ$130,637, at the median NZ$101,000 and at the 75th percentile NZ$162,917. Fees paid to Non Executive Directors in New Zealandâ&#x20AC;&#x2122;s Top 50 companies on average stood at NZ$73,395, at the median NZ$63,000 and at the 75th percentile NZ$90,000. Ranking the Top 50 New Zealand companies by revenue, the average fees paid to Chairmen in the Top 10 organisations are NZ$223,713 and the median is NZ$193,634 compared with those companies ranked 25-50 where the average fee is NZ$95,567 and the median fee NZ$90,000. Size of company in terms of revenue also has an impact on fees for Non Executive Directors with the Top 10 ranked companies having an average of NZ$111,038 and a median of NZ$107,500 while those companies ranked Top 25-50 have average Non Executive Director fees of NZ$56,655 and median fees of NZ$52,000.
22
Table 8
Non Executive Chairmen and Non Executive Directors’ fees in New Zealand leading companies by revenue Average Median Top 50 Companies by revenue NZ$ NZ$
75th Percentile NZ$
25th percentile NZ$
Sample #
Total sample Chairman
130,637
101,000
162,917
80,000
47
Non Executive Director
73,395
63,000
90,000
50,000
208
Chairman
304,767
302,500
381,000
226,267
4
Non Executive Director
144,942
154,791
159,280
125,354
19
Chairman
149,422
154,013
185,000
103,250
12
Non Executive Director
79,445
78,975
90,000
65,000
62
Chairman
112,994
105,500
129,885
86,250
14
Non Executive Director
66,157
60,000
77,938
48,750
59
Chairman
90,936
80,000
100,000
74,000
17
Non Executive Director
54,167
50,000
60,000
44,875
68
Revenue ranges greater than $2 billion
Revenue ranges $500 million - $2 billion
Revenue ranges $200 million - $500 million
Revenue ranges less than $200 million
Revenue ranked Top 10 Companies Chairman
223,713
193,634
238,375
160,208
10
Non Executive Director
111,038
107,500
147,357
79,937
47
121,940
126,000
137,500
85,000
13
71,121
72,500
88,803
50,000
64
Chairman
96,567
90,000
103,250
74,750
24
Non Executive Director
56,655
52,000
60,000
45,000
97
Revenue ranked Top 10 - 25 Companies Chairman Non Executive Director Revenue ranked Top 25 - 50 Companies
New Zealand leading companies by market capitalisation As in Australia, Directors’ fees were highest among larger companies when ranked by market capitalisation. Table 9 shows the fees paid to Non Executive Directors in New Zealand’s leading organisations. Chairmen in the Top 10 New Zealand companies were paid average fees of NZ$219,068 and median fees of NZ$185,426. The average Chairman’s fee in companies ranked 25-50 by market capitalisation is NZ$88,501 and the median fee NZ$80,000. Fees for Non Executive Directors with the top 10 ranked companies have an average of NZ$114,729 and a median of NZ$107,00 while those companies ranked 25-50 have average Non Executive Director fees of NZ$53,192 and median fees of NZ$50,000.
23
Table 9:
Non Executive Chairmen and Non Executive Directorsâ&#x20AC;&#x2122; fees in New Zealand leading companies by market capitalisation Top 50 Companies Average Median by market capitalisation NZ$ NZ$ Total sample
75th percentile NZ$
25th percentile NZ$
Sample #
Chairman
130,637
101,000
162,917
80,000
47
Non Executive Director
73,395
63,000
90,000
50,000
208
Chairman
219,068
185,426
231,500
176,589
10
Non Executive Director
114,729
107,100
141,232
90,000
47
134,340
156,125
100,000
14
70,000
87,200
50,055
69
74,500
23
42,313
92
Market capitalisation ranked Top 10 Companies
Market capitalisation ranked Top 10 - 25 Companies Chairman 100 Non Executive Director
136,696 Male 72,177
Market capitalisation ranked Top 25 - 50 Companies 80 Chairman
Female 88,501
Non 60 Executive Director
53,192
NB Non Executive Director excludes Chairmen 40
New Zealand: Board demographics 20
The ability to become a strategic partner to 80,000 100,500 the CEO and develop 50,000 knowledge 60,000 in-depth of the business is not simply desireable but mandatory for success as a CFO.
Board composition by gender â&#x20AC;&#x201C; Non Executive Directors 0
executive Non executive chairman Chart 6Non shows that,directors as in Australia, males hold the overwhelming majority of Non Executive Director positions in the Top 50 New Zealand companies. 95.8 percent of Non Executive Chairmen are males while, females occupied only 11.7 percent of Non Executive board positions.
Chart 6
Board composition by gender for Top 50 95.8%
100%
88.3%
Male Female
11.7% 4.2% 0%
24
Non Executive Directors Non Executive Chairmen
Board comparison by age â&#x20AC;&#x201C; Non Executive Directors and Chairmen It should be noted that not all Directors in the sample disclose their age. For all Non Executive Directors and Chairmen across the Sample, the average age is 60 years (Table 10).
Table 10
Age of Chairmen and Non Executive Directors in New Zealand Top 50 Companies Top 50 Companies by Revenue Average Median Total Sample
60
75th Percentile
25th Percentile
Sample #
67
55
85
59
15
61
Revenue Ranges Greater than $2 billion
61
61
64
$500 million - $2 billion
60
59
67
56
33
$200 - $500 million
60
61
65
54
22
Less than $200 million
60
63
69
56
15
New Zealand: Board committees Distribution of committee types Table 11 shows that all the Top 50 companies in New Zealand have an Audit Committee, and 90 percent have a Remuneration Committee.
Table 11
Distribution of core committees in New Zealand Top 50 Companies Committee Audit 1 Compliance 2
Top 50 #
Top 50 %
50
100%
1
2%
Corporate governance
3
6%
Nominations 3
21
42%
Occupational health & safety 4
4
8%
Other
10
20%
Remuneration
45
90%
Risk 7
9
18%
5
6
Includes: stand alone Audit Committee, Audit & Compliance Committee, Audit Compliance & Risk Committee and an Audit & Risk Committee. 1
2 Stand alone Compliance Committee. 3 Stand alone Nomination Committee. 4 Includes: stand alone OH/S Committee, OH/S & Environment Committee and a standalone Environment Committee. 5 All other committee types. 6 Includes: stand alone Remuneration Committee, Remuneration & Nominations Committee and Remuneration & HR Committee. 7 Includes: stand alone Risk Committee, Finance Committee and Risk & Investment Committee.
25
List of organisations surveyed â&#x20AC;&#x201C; Australia Abacus Property Group
Automotive Holdings Group Limited
Coalspur Mines Limited
Acrux Limited
Avoca Resources Limited
Coca-Cola Amatil Limited
Adelaide Brighton Limited
AWB Limited
Cochlear Limited
Aditya Birla Minerals Limited
AWE Limited
Cockatoo Coal Limited
AGL Energy Limited
AXA Asia Pacific Holdings Limited
Codan Limited
ALE Property Group
Bank of Queensland Limited
Commonwealth Bank of Australia
Alesco Corporation Limited
Beach Energy Limited
Computershare Limited
Allied Gold Limited
Bell Financial Group Limited
ConnectEast Group
Alumina Limited
Bendigo and Adelaide Bank Limited
Consolidated Media Holdings Limited
Amalgamated Holdings Limited
BHP Billiton Limited
Corporate Express Australia Limited
Amcom Telecommunications Limited
Billabong International Limited
Count Financial Limited
Amcor Limited
BKI Investment Company Limited
Country Road Limited
AMP Limited
Blackmores Limited
Crane Group Limited
Ampella Mining Limited
BlueScope Steel Limited
Cromwell Group
Ansell Limited
Boart Longyear Limited
Crown Limited
AP Eagers Limited
Boral Limited
CSG Limited
APA Group
Bow Energy Limited
CSL Limited
APN News & Media Limited
Bradken Limited
CSR Limited
Aquila Resources Limited
Brambles Limited
CuDeco Limited
ARB Corporation Limited
Breville Group Limited
Customers Limited
Argo Investments Limited
Brickworks Limited
David Jones Limited
Aristocrat Leisure Limited
Brockman Resources Limited
Dexus Property Group
Arrow Energy Limited
BT Investment Management Limited
Discovery Metals Limited
Asciano Group
Cabcharge Australia Limited
Diversified United Investment Limited
Aspen Group Limited
Caltex Australia Limited
Dominion Mining Limited
ASX Limited
Campbell Brothers Limited
Dominos Pizza Enterprises Limited
Atlas Iron Limited
Cape Lambert Resources Limited
Downer EDI Limited
Ausdrill Limited
Carbon Energy Limited
Eastern Star Gas Limited
Ausenco Limited
Cardno Limited
Elders Limited
Austal Limited
Carlton Investments Limited
Emeco Holdings Limited
Austar United Communications Limited
Carnarvon Petroleum Limited
Energy Developments Limited
Austbrokers Holdings Limited
Carsales.com Limited
Energy Resources of Australia Limited
Austereo Group Limited
Cash Converters International Limited
Envestra Limited
Austin Engineering Limited
Catalpa Resources Limited
Extract Resources Ltd
Australand Property Group
CBH Resources Limited
Fairfax Media Limited
Australia and New Zealand Banking Group Limited
Cellestis Limited
Fantastic Holdings Limited
Centennial Coal Company Limited
FKP Property Group
Australian Agricultural Company Limited
CGA Mining Limited
Fleetwood Corporation Limited
Australian Foundation Investment Company Limited
Challenger Financial Services Group Limited
FlexiGroup Limited
Australian Pharmaceutical Industries Limited
Charter Hall Group
Forge Group Limited
Australian United Investment Company Limited
Choiseul Investments Limited
Fortescue Metals Group Limited
Citadel Resource Group Limited
Fosterâ&#x20AC;&#x2122;s Group Limited
Clearview Wealth Limited
Gindalbie Metals Limited
Clough Limited
Giralia Resources NL
26
Flight Centre Limited
Global Mining Investments Limited
Medusa Mining Limited
Premier Investments Limited
Gloucester Coal Limited
Mermaid Marine Australia Limited
Primary Health Care Limited
Goodman Fielder Limited
Mesoblast Limited
Prime Infrastructure Group
Goodman Group
Metcash Limited
Prime Media Group Limited
GPT Group
Milton Corporation Limited
GrainCorp Limited
Minara Resources Limited
Programmed Maintenance Services Limited
Grange Resources Limited
Mincor Resources NL
Qantas Airways Limited
GUD Holdings Limited
Mineral Deposits Limited
QBE Insurance Group
Gunns Limited
Mineral Resources Limited
Ramsay Health Care Limited
GWA International Limited
Mirabela Nickel Limited
REA Group Limited
Harvey Norman Holdings Limited
Mirvac Group Limited
Reckon Limited
Hastie Group Limited
Mitchell Communications Group Limited
Redflex Holdings Limited
Healthscope Limited
Molopo Energy Limited
Reece Australia Limited
Hills Industries Limited
Moly Mines Limited
Regis Resources Limited
Horizon Oil Limited
Monadelphous Group Limited
Reject Shop Limited (The)
Hutchison Telecommunications (Australia) Limited
Mount Gibson Iron Limited
Resolute Mining Limited
Murchison Metals Ltd
Retail Food Group Limited
iiNet Limited
National Australia Bank Limited
Ridley Corporation Limited
Iluka Resources Limited
National Hire Group Limited
Rio Tinto Limited
Incitec Pivot Limited
Navitas Limited
Riversdale Mining Limited
Independence Group NL
New Hope Corporation Limited
Roc Oil Company Limited
Industrea Limited
Newcrest Mining Group
SAI Global Limited
Infigen Energy Limited
Nexus Energy Limited
Salmat Limited
Insurance Australia Group Limited
NIB Holdings Limited
Sandfire Resources NL
Intrepid Mines Limited
Nkwe Platinum Limited
Santos Limited
InvoCare Limited
Northern Iron Limited
Sedgman Limited
IOOF Holdings Limited
NRW Holdings Limited
SEEK Limited
IRESS Market Technology Limited
Nufarm Limited
Servcorp Limited
Iron Ore Holdings Limited
OneSteel Limited
Seven Group Holdings Limited
iSOFT Group Limited
Orica Limited
Sigma Pharmaceuticals Limited
JB Hi-Fi Limited
Origin Energy Limited
Silex Systems Limited
Kagara Limited
OrotonGroup Limited
Silver Lake Resources Limited
Karoon Gas Australia Limited
OZ Minerals Limited
Sims Metal Management Limited
Kingsgate Consolidated Limited
Pacific Brands Limited
Sirtex Medical Limited
Kingsrose Mining Limited
Paladin Energy Limited
Skilled Group Limited
Leighton Holdings Limited
PanAust Limited
SMS Management & Technology Limited
Lend Lease Group
Panoramic Resources Limited
Sonic Healthcare Limited
Linc Energy Limited
PaperlinX Limited
SP AusNet
Lynas Corporation Limited
Peet Limited
Spark Infrastructure Group
MAC Services Group Limited (The)
Perilya Limited
Sphere Minerals Limited
Macarthur Coal Limited
Perpetual Limited
Spotless Group Limited
Macmahon Holdings Limited
Perseus Mining Limited
St Barbara Limited
Macquarie Group Limited
Pharmaxis Limited
Stockland Corporation Limited
Mantra Resources Limited
Platinum Australia Limited
Straits Resources Limited
McMillan Shakespeare Limited
Platinum Capital Limited
27
List of organisations surveyed â&#x20AC;&#x201C; New Zealand STW Communications Group Limited
Abano Healthcare Group Limited
Sky Network Television Limited
Summit Resources Limited
AFFCO Holdings Limited
SKYCITY Entertainment Group Limited
Suncorp-Metway Limited
Air New Zealand Limited
Steel & Tube Holdings Limited
Super Cheap Auto Group Limited
Auckland International Airport Limited
Telecom Corporation of New Zealand
TABCORP Holdings Limited
Briscoe Group Limited
TOWER Limited
Tassal Group Limited
Cavalier Corporation Limited
TrustPower Limited
Tatts Group Limited
Contact Energy Limited
Turners & Growers Group
Technology One Limited
Delegatâ&#x20AC;&#x2122;s Group Limited
Vector Limited
Telstra Corporation Limited
EBOS Group Limited
Wakefield Health Limited
Ten Network Holdings Limited
Fisher & Paykel Appliances Holdings Limited
Warehouse Group Limited (The)
Thakral Holdings Limited Toll Holdings Limited TOWER Australia Group Limited TPG Telecom Limited Transfield Services Limited Transpacific Industries Group Ltd Transurban Group Limited Troy Resources NL UGL Limited Unilife Corporation Universal Biosensors Inc Valad Property Group
Fisher & Paykel Healthcare Corporation Limited Fletcher Building Limited Freightways Limited Hallenstein Glasson Holdings Ltd Infratil Limited Lyttelton Port Company Limited Mainfreight Limited Methven Limited Metlifecare Limited Michael Hill International Limited
Village Roadshow Limited
Millennium & Copthorne Hotels New Zealand Limited
Virgin Blue Holdings Limited
New Zealand Exchange Limited
Washington H Soul Pattinson & Company Limited
New Zealand Oil & Gas Limited
Watpac Limited
New Zealand Refining Company Limited (The)
Wesfarmers Limited
Nuplex Industries Limited
West Australian Newspapers Holdings Limited
NZ Farming Systems Uruguay Limited
Western Areas NL Westfield Group Westpac Banking Corporation White Energy Company Limited Whitehaven Coal Limited WHK Group Limited Wide Bay Australia Ltd Woodside Petroleum Limited Woolworths Limited WorleyParsons Limited Wotif.com Holdings Pty Ltd
Opus International Consultants Limited PGG Wrightson Limited Pike River Coal Limited Port of Tauranga Limited Property For Industry Limited Pumpkin Patch Limited Pyne Gould Corporation Limited Rakon Limited Restaurant Brands New Zealand Ltd Rubicon Limited Ryman Healthcare Limited Sanford Limited Skellerup Holdings Limited
28
Xero Limited