Acer Strengthens Executives' Remuneration Management System In Order to Enhance Corporate Governance and Maintain Shareholders' Long-Term Interests
TAIPEI, TAIWAN (June 1, 2012) – To enhance corporate governance, Acer's board of directors approved the Executive Remuneration Guidelines. By doing so, Acer not only strengthens the linkages between executives’ remuneration and corporate long-term performance, but also reduces the risks that may arise from remuneration; thus, fortifying operational stability and growth, and maintaining shareholders’ long-term interests.
To enhance executive remuneration practices at Acer, the board of directors established a compensation committee last August, chaired by independent director Sir Julian Horn-Smith. The company also hired professional HR consulting firm, Towers Watson, to assist it in forming a taskforce to develop the Executive Remuneration Guidelines in line with international benchmarking practices, which have been approved by the board.
In March 2011, after the departure of former president & CEO Mr. Gianfranco Lanci, Acer paid his severance settlement in accordance with international practices and his employment contract. The two sides also signed a non-compete agreement. Soon afterward, Acer discovered high channel inventory and disputed accounts receivable in the EMEA operations. To solve the issue, Acer wrote-off US$150 million one-time and resulted in operational loss. Concurrently, the company streamlined EMEA operation by reducing 300 employees, slashed global executives’ 2011 bonus and 50% BOD remuneration. Chairman & CEO J.T. Wang also relinquished his 2011 remuneration and employee bonus. Although Acer adopted a number of contingency measures, the company still suffered an operational loss in the full year of 2011.
Subsequently, Mr. Lanci joined a competitor of Acer in September of the same year as a consultant and was then appointed as the president of EMEA and global vice president of that company in April this year. Mr. Lanci breached the non-compete clause, therefore Acer has taken legal action against him.
With the occurrence of all these events, the management team deeply felt the need to further enhance corporate governance, review the executive remuneration measures, and especially take into account of Acer shareholders’ long-term interests.
The main concepts of the Executive Remuneration Guidelines are based on long-term operating performance and shareholders’ interests. This includes appropriate incentive management, along with mechanisms such as deferred payments and remuneration clawbacks, set to prevent executives taking inappropriate measures to achieve performance goals, and causing the company to assume unnecessary risks.
Acer’s Chairman J.T. Wang said that the new executive remuneration system is aligned with global best practices and can better retain talents, and reduces the possible risks associated with remuneration. Acer believes such strategy will contribute to sustainable and stable growth.