Shareholders will have unprecedented power to have a say over executive remuneration with the passage of historic reforms through the Parliament, said Parliamentary Secretary to the Treasurer, David Bradbury.
The Corporations Amendment (Improving Accountability on Director and Executive Remuneration) Bill 2011 was passed by the Senate today, paving the way for the reforms contained in the legislation to commence on 1 July.
"I would like to thank all of the stakeholders who have participated in the lengthy policy development and consultation process, which began with the Government's announcement of the Productivity Commission inquiry into executive remuneration in 2009 and involved more than 200 written submissions and a series of public hearings," said Mr Bradbury.
"The Gillard Government's executive remuneration reforms will improve transparency and give shareholders more say over the pay of directors.
"Executives who bring value to a company should be appropriately remunerated for their work, but these reforms ensure that those executives will be more accountable to shareholders for the level and composition of that remuneration.
"Shareholders, as the owners of a company, take on the risk of investing their capital and share in a company's profits and losses, and the Gillard Government believes they deserve more say over how the pay of company executives is set."
Amendments proposed by the Coalition that would have watered down the 'two-strikes' rule and amendments proposed by the Greens to cap executive salaries both failed to gain the support of the Senate.
"Some of the key reforms include giving shareholders more power to have a say over remuneration, improving the requirements for disclosure of remuneration consultants and prohibiting directors from hedging their remuneration or voting on the remuneration of key management personnel," said Mr Bradbury.
"Under the new 'two-strikes' rule, if the company's remuneration report has received a 'no' vote of 25 per cent or more at two consecutive annual general meetings, shareholders will have the opportunity to vote on a motion to spill the board. Where a spill motion has been supported by a majority of shareholder votes, directors will face fresh elections at a subsequent spill meeting.
"Boards will also have to declare the use of remuneration consultants and directors will be prohibited from participating in votes on remuneration of key management personnel.
"These reforms will ensure that we have an internationally competitive system of executive remuneration that is transparent and accountable to shareholders.
"Through these sensible reforms, we want to address conflicts of interest that exist in the remuneration setting process and promote a culture of responsible remuneration practices."
20 June 2011