The Government has sought to short-circuit the executive remuneration debate by calling a Productivity Commission inquiry and lowering the threshold for shareholder approval of termination payouts.
The rising tide of criticism of executive remuneration has left the Government exposed. Kevin Rudd first raised the issue himself last year but has failed to do anything since other than refer the matter to APRA in the context of risk management in the financial sector. The Pacific Brands case significantly ramped up discontent over salaries and payouts last month and the AIG payments in the US hasn’t helped.
In contrast, the Greens have regularly sought to use bills in the Senate to impose limits on remuneration and are currently threatening to block the Australian Business Investment Partnership bill in the Senate unless it requires executive remuneration limits for any companies that use the ABIP facility.
This morning, however, the Government announced it would be requiring shareholder approval for all termination payouts of any kind above one years’ salary, extending the requirement from directors to all executives named in a company’s remuneration report. Treasurer Wayne Swan has also appointed former ACCC head Allan Fels as an associate commissioner of the Productivity Commission to assist with a review of executive remuneration, with a report due before the end of the year.
The inquiry itself would have drawn criticisms of yet another review by the Government (which will be the Opposition’s line of attack). However, coupled with an extension of shareholder approval it will probably enable the Government to hold the line on further calls for regulation of executive remuneration, despite the failure of shareholders to use powers they already have under existing Corporations Law to regulate remuneration.
The new limit won’t stop headlines about excessive golden handshakes, though: it will not be retrospective, which means directors and executives will continue to walk away from commercial wreckage with handsome payouts for years to come.