Government moves to curb executive payouts

18 Mar 2009, 12:41 pm   -   Source: AAP
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The Rudd government will introduce new laws to curb excessive executive payouts, Treasurer Wayne Swan says.

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The Rudd government will introduce new laws to curb excessive executive payouts, Treasurer Wayne Swan says.

Under the change flagged by the treasurer, shareholder approval will be required for termination payouts of more than one year's base pay.

"It is very important that we ensure executive pay is in step with good governance ... and meets decent community standards," he told reporters.

Mr Swan said in some instances the size of golden handshakes were "obscene".

"The government will curb golden handshakes in the form of excessive termination payments," he said.

Mr Swan said that under the former Howard government termination payments could be up to seven times a director's annual pay before there was any shareholder approval.

"Shareholder approval will now be required for a termination payment exceeding one year's base pay," he said.

Mr Swan said the Productivity Commission would conduct an inquiry to be headed by former Australian Competition and Consumer Commission (ACCC) chief Professor Allan Fels.

"I say this to executives that are listening to or watching this announcement - the government does expect you to do the right thing by the community and the country, and particularly given our circumstances at the moment," Mr Swan said.

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

Mr Swan said the government wanted to introduce provisions that would result in greater trust between executives and the rest of the community.

Corporate Law Minister Nick Sherry cited some examples of exorbitant payouts to departing executives. Last year, OZ Minerals director Owen Hegarty received a bonus of $8.35 million, which amounted to 642 per cent of his base salary.

"I would argue very strongly that if these new laws were in place he would have found it very, very difficult to have received that particular payment," Senator Sherry said.

Former Publishing and Broadcasting Ltd (PBL) boss John Alexander was last year given a $15 million termination payment, 468 per cent of his salary, after PBL was split into Consolidated Media Holdings (CMH) and gaming company Crown.

"Again I would contend that with these provisions in place, he would have found it very difficult to have received this sort of payment," Senator Sherry said of Mr Alexander, now executive chairman with CMH.

"We believe that the significant reforms we have announced on so-called golden handshakes will be effective."

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