Shareholders will have more say over the pay of company executives with the commencement today of the Gillard Government's new laws on executive remuneration, said Parliamentary Secretary to the Treasurer, David Bradbury.
"The Gillard Government's reforms, which come into effect today, will improve transparency and accountability around the setting of executive pay and give shareholders more power to have a say," said Mr Bradbury.
Some of the key elements of the new laws include:
- A new 'two-strikes' rule, where shareholders can vote to spill a board if there have been 'no' votes of more than 25 per cent recorded against the remuneration report at two consecutive annual general meetings;
- Greater accountability around the engagement of remuneration consultants and transparency about the advice they provide and who they provide it to;
- Removing conflicts of interest by prohibiting key management personnel from voting on remuneration matters; and
- Prohibiting executives from hedging against their remuneration packages to better link executive pay to the performance of a company.
"These reforms, which passed the Parliament last month, were the product of a thorough policy analysis by the Productivity Commission and lengthy consultation with stakeholders," said Mr Bradbury.
"These new laws encourage boards to better engage with shareholders and be more transparent around the decisions they make on executive pay.
"Under the two-strikes rule, if boards fail to respond to shareholder concerns about the level or composition of executive remuneration, shareholders will now have a greater ability to bring a board to account.
"The Government also wants to remove the real and perceived conflicts of interest in Australia's executive remuneration framework by improving confidence in the way executive pay is set.
"These are important reforms that will give shareholders more say, promote a culture of responsible business practice and maintain Australia's international competitiveness."
1 July 2011