International Law

Review of executive termination payments

Treasurer, Wayne Swan, and Minister for Superannuation and Corporate Law, Senator Nick Sherry, have announced reforms aimed at curbing excessive "golden handshakes" - or termination payments - paid to company executives.

The Government will amend the Corporations Act to significantly lower the threshold at which termination payments must be approved by shareholders from the current level (section 200F) down to one year's average base salary.

The Government will also legislate to extend the range of executives whose termination payments can be subject to shareholder approval.

Currently only directors' termination payments must be approved, however the Government will legislate to expand the coverage of shareholder approval to cover all those executives named in the company's remuneration report.

Finally the Government will also broaden the definition of "termination benefit" to catch all types of payment and rewards given at termination.

The proposed changes to the law will not apply retrospectively. Existing contracts on termination payments will not be affected.

The Government has also referred the broader issue of executive remuneration to the Productivity Commission, which will provide a final report within nine months.

Full post as published by Australian Regulatory Compliance Review on March 17, 2009 (boomark / email).