Executive Remuneration in Australia

Productivity Commission Report No. 49, December 2009

520 Pages Posted: 8 Mar 2010

Date Written: December 19, 2009

Abstract

The Productivity Commission’s final report on executive remuneration was released in January 2010.

Commenting on the report's release, Commission Chairman Gary Banks said: 'Substantial feedback was received in response to the Commission’s preliminary proposals. Our final recommendations are likely to be more robust and implementable as a result. Most changes are fine-tuning, but some are more significant, including the proposed 'two strikes' rule, which requires boards to submit for re-election where shareholders repeatedly vote against their remuneration decisions.' Under the Commission's reformulation, shareholders can express their opinion about the company’s remuneration policies in the knowledge that a second no vote above 25 per cent would trigger a separate (majority) resolution to spill the board, but not a spill itself. Shareholders' say on pay would be elevated further by the report'’s recommendation to preclude executives and board members from voting on remuneration reports. An area of universal agreement is the need to improve the information content and accessibility of remuneration reports. The Commission’s recommendations would help shareholders understand what executives are actually being paid and why.

Overall, the Commission found that, despite some problems, there have not been widespread failures in remuneration setting in Australia. Gary Banks described the final reform package as 'a measured and proportionate one. It will not, and should not, stop our top executives from earning high salaries. But it should reduce the scope for anomalies or economically inefficient outcomes, and promote greater trust in corporate Australia.'

Keywords: salaries, pay equity, senior executives

JEL Classification: J31, J44, M52, P31

Suggested Citation

Commission, Productivity, Executive Remuneration in Australia (December 19, 2009). Productivity Commission Report No. 49, December 2009, Available at SSRN: https://ssrn.com/abstract=1565171

Productivity Commission (Contact Author)

Government of Australia

Level 28
35 Collins St.
Melbourne, Victoria, Victoria 3000
Australia

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