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April 14, 2008

Comments

Rienzo

I think critical point to extract from the Codes, is the final part of the description which reads "the sum of contributions is averaged over the number of years". The important word there is AVERAGED, where the cumulative contributions over the 5 year period are used to ascertain compliance against an averaged target. Because targets are set against future performance, and measurements are made retrospectively it is impossible to say with any accuracy up front, how much a company should be dedicating to their ED or SED spend - they can only know for certain once they have closed off their Financial year and measured NPAT (or loss) acheived. THEN they can determine whether or not you have actually acheived target. So the cumulative measurement actually assists companies to carry over non-compliance year-on-year, and then average it out to earn maximum points. It seems like a bitter pill / stick approach, but over the 5 year cumulative period the measured entity actually scores. I agree with Vuyo.

Paul Janisch

I think we agree on the same point. The cumulative measurements are measured against an average of 3% of NPAT over five years. This figure will always remain 3% of NPAT. What Vuyo and Kyle are arguing is that the measurement for year one is not closed off after that year (if the target is not met). Therefore that percentage that wasn't contributed in year one moves over to year two and gets added to the targets of year two. In other words the targets are cumulative as well.

I can't see that this is the case in the codes at all. And as Obed said to me recently - this will cause a situation where ED contributions dry up all together because companies would rather forgo the points than be punished for not achieving the target each year.

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