International Law

The Productivity Commission has released a discussion draft of its report on executive remuneration. Submissions close on 6 November 2009.

The draft report complements but is separate from draft standards on financial institution remuneration issued by the Australian Prudential Regulation Authority and the Corporations Amendment (Improving Accountability on Termination Payments) Bill (see also here) .

The draft recommendations include:

• company executives identified as key management personnel and all directors (and their associates) be prohibited from voting their shares on remuneration reports and any other remuneration-related resolutions
• prohibit all company executives from hedging unvested equity remuneration and vested equity remuneration that is subject to holding locks
• prohibit company executives identified as key management personnel and all directors (and their associates) from voting undirected proxies on remuneration reports and any other remuneration-related resolutions
• require proxy holders to cast all of their directed proxies on remuneration reports and any other remuneration-related resolutions
• remuneration reports should additionally include:
  ? a plain English summary statement of companies? remuneration policies
  ? actual levels of remuneration received by executives
  ? total company shareholdings of the individuals named in the report
• individual remuneration disclosures be confined to the key management personnel. The additional requirement for the disclosure of the top five executives should be removed
• The cessation of employment trigger for taxation for equity-based payments should be removed, with the taxing point for equity or rights that qualify for deferral being at the earliest of: where ownership of, and free title to, the shares or rights is transferred to the employee, or seven years after the employee acquires the shares
• confirmation to companies that electronic voting is legally permissible without the need for constitutional amendments
• The Corporations Act 2001 should be amended to require that where a company?s remuneration report receives a ?no? vote of 25 per cent or higher, the board be required to report back to shareholders in the subsequent remuneration report explaining how shareholder concerns were addressed and, if they have not been addressed, the reasons why

The final report will be prepared after submissions have been received and will be forwarded to the Government by 19 December 2009.