The Federal Government announced on 18 March 2009 that it would introduce new laws to curb the size of excessive executive 'golden handshakes'.
Treasurer Wayne Swan has stated that the new laws will require shareholder approval for termination payouts to executives of greater than one year's base salary. The Corporations Act 2001 (Cth) currently allows termination payments of up to seven times a person's average annual salary for the previous three years before any shareholder approval is required.
The announcement comes after recent media coverage of excessive executive pay outs, including that of former chief executive of Pacific Brands, Paul Moore, who received a retirement payment of $3.5 million when he resigned halfway through the 2008 financial year despite the company's poor performance.
The proposed new laws will require shareholders to remain informed about the salaries of executives in companies that they hold shares in. However, there are now concerns that the new measure will simply encourage executives to negotiate higher base salaries.
The Federal Government has also referred the issue of executive remuneration to the Productivity Commission. The Commission has been asked to conduct an inquiry into the link between performance and pay and how executive salaries are determined and recommend improvements to the current framework governing Australian remuneration practices. The final report is expected to be submitted to the Federal Government by December.
We will keep you updated on these proposed legislative amendments and any other developments.
