The Parliamentary Secretary to the Treasurer, the Hon David Bradbury MP, introduced legislation to give shareholders new powers over the pay of company directors and executives and strengthen the transparency of Australia's executive remuneration framework. The Corporations Amendment (Improving Accountability on Director and Executive Remuneration) Bill 2011 implements the Government's response to the recommendations made by the Productivity Commission in its recent inquiry into Australia's remuneration framework.
The key measures to improve the remuneration framework include:
- Strengthening the non-binding vote on remuneration, by giving shareholders the opportunity to remove the directors if the company's remuneration report has received a 'no' vote of 25 per cent or more at two consecutive annual general meetings
- Providing accountability and transparency with the use of remuneration consultants
- Eliminating conflicts of interest by prohibiting directors, executives and their closely related parties from participating in the vote on the remuneration of key management personnel
- Ensuring that the link between remuneration and performance remains closely linked by prohibiting directors and executives from hedging their incentive remuneration, and
- Requiring shareholder agreement for declarations of 'no vacancy' at an annual general meeting, should the number of board positions filled be less than the maximum number specified in the company's constitution.
The draft legislation was released for public consultation, which concluded last month. The Government reforms are intended to take effect from 1 July 2011.
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