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The "golden handcuffs" of stock market listing have tightened for Australia's entrepreneurs, with executive pay limitations making it harder to attract talent in a competitive global market.
This was a key concern raised yesterday by telecommunications and data cloud pioneer Bevan Slattery while speaking at a breakfast organised by Business News Australia at Customs House, Brisbane.
"The ASX has a bit of growing up to do. It needs to actually harden up a bit and realise it's a capitalist environment here," said Slattery, who has listed five companies on the Australian Stock Exchange with improved internet connectivity as a common thread between them.
Businesses he has founded include Superloop (ASX: SLC) and its subsidiary SubPartners, Megaport (ASX: MP1), NextDC (ASX: NXT), Asia Pacific Data Centre Trust (ASX: AJD) and PIPE Networks, which became part of TPG Telecom (ASX: TPG) in 2010.
The prolific start-up instigator discussed how a backlash against executive salaries could have unintended consequences on businesses by making it more challenging to lure the brightest minds into senior roles.
"When we give options and shares to certain executives we actually have to put that as part of the remuneration report," he said.
These reports then need to be submitted at a company's AGM each year, and that's when the trouble starts.
"Unfortunately, what happens is a bunch of our institutional shareholders have been mandated generally by the funds that give them the money that they have to take the recommendation of a proxy advisor on the remuneration report," he said.
"They [proxy advisors] are toxic to the Australian Stock Exchange and the culture. And here's why it's because they think every company is AMP or Telstra or CBA.
"They have no understanding or knowledge but they want us to restructure our short-term incentives, our long-term incentives, our remuneration plan to actually suit their cookie cutter that they've got for an ASX300 company, which is galactically stupid."
Slattery emphasised the businesses he led were not so much competing with major ASX companies for in-demand executive talent, but rather the world's leading tech and telco multinationals like AT&T, Verizon, Google and Amazon.
"I'm trying to hire the best people around, and I can go 'well I can give you 20,000 options or 100,000 options', and they go 'I get $300,000 worth of shares every year plus the salary'," he said.
"That's what I'm competing with, and I've got these guys behind me telling me how I should recruit these people and what I should be paying them.
"Here's where it gets even worse. You don't need 50 per cent approval; you need 75 per cent approval to get this done."
The entrepreneur then emphasised the system for these votes was not even truly representative of total shareholdings, putting him at a disadvantage as a founder who wants to remain invested in businesses he has started.
"What you actually need is 75 per cent approval from those who are eligible to vote. I own 25-35 per cent of these companies, so already it's not 75 per cent of the share on issue," he said.
"We figured out that if two institutions who hold 12.5 per cent have outsourced their decision - because their funds require them to do that to a proxy advisor, then the rem report will be overturned."
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