Shareholders have used new powers to record a 'strike' against a company this week for the first time since the Gillard Government's executive pay reforms took effect, said Parliamentary Secretary to the Treasurer, David Bradbury.
Under the Gillard Government's reforms to executive pay laws, which came into effect on 1 July this year, shareholders can vote to spill a board and force fresh elections if there have been 'no' votes of 25 per cent or more recorded against the remuneration report at two consecutive annual general meetings.
"This week, we saw the first use of the Gillard Government's new executive pay laws, with a strike recorded against a company where around 45 per cent of shareholders voted against the company's remuneration report," said Mr Bradbury.
"I welcome the preparedness of shareholders to use these new powers and I encourage boards of any company that is the subject of a strike to better engage with shareholders and their advisers.
"These new laws are about making sure that executive pay remains closely connected to the performance of a company.
"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.
"By making boards more accountable to shareholders, the Gillard Government wants to see a shift in boardroom culture towards better engagement with shareholders and more transparency around the decisions they make on executive pay.
"The Government will be closely monitoring the implementation of the new laws and will also be announcing, in due course, its response to CAMAC's report into simplifying remuneration reports and to the consultation on the 'clawback' proposals."
The reforms to executive remuneration came into effect from 1 July this year following an extensive two-year policy development process that included a comprehensive Productivity Commission inquiry. In addition to the two strikes test the reforms also include a range of other measures to improve transparency, including around the use of remuneration consultants and the 'cherry picking' of proxy votes.
21 October 2011