Thursday, June 23rd, 2011 - Australian Institute of Company Directors (AICD)
The Australian Institute of Company Directors (AICD) is disappointed with the excessive and fundamentally flawed executive remuneration legislation passed by the Senate tonight.

Company Directors remains convinced that it will have unintended consequences on corporate governance; hindering the ability of company boards to deliver value for their shareholders and endanger the prosperity of the business sector.

Chief Executive Officer, John Colvin, said the Federal Government had made a few improvements in response to feedback received from Company Directors and others, but failed to address a number of major problems contained in the legislation, particularly the ‘two-strikes’ and ‘no-vacancy’ rules.

The unintended consequences of the Corporations Amendment (Improving Accountability on Director and Executive Remuneration) Bill 2011 will be harmful to Australian companies by creating instability and reducing flexibility, potentially disadvantaging both employees and shareholders, Mr Colvin said.

Company Directors has argued that the Government should remove the board spill mechanism in the ‘two-strikes’ requirement to make it more practical and effective, while the ‘no vacancy’ proposals have little to do with executive remuneration.

The new requirements mean that a small minority of shareholders, possibly representing as few as 10 per cent of the voting shares, can table a disruptive resolution achieving a ‘strike’.

Mr Colvin said this heavy-handed legislative approach will now force boards to operate with one hand tied behind their back.

The new rules could force boards to operate constantly on a verge of a spill, with each spill doing damage to the company’s value and putting its employees’ jobs in danger.

Interfering with how boards manage their affairs in this way will have a negative effect on the good corporate governance record of Australian boards generally, and there is no demonstrated need for it, Mr Colvin said.

With this legislation the Australian Government has saddled its boards with restrictions, which go further than of any other country in the world, dulling our competitive edge.

Company Directors remains disappointed that the Bill does not include changes proposed by the Productivity Commission to remove the current taxation impediment to deferred equity incentive pay, allowing deferral of equity incentives beyond the point where an executive ceases employment.
Implementation of this widely supported change would remove a barrier to structuring deferred executive remuneration and allow boards to offer executives and shareholders better structured remuneration, Mr Colvin said.

Media Contacts:

Steve Burrell, General Manager Communications and Public Affairs, (02) 8248 6627 or 0407 708 485

Ian Zakon, Media and Government Relations Advisor, (02) 8248 2786 or 0438 131 813

Contact Profile

Australian Institute of Company Directors (AICD)


The Australian Institute of Company Directors provides education, information on corporate governance for directors and boards Australia wide, with offices in each state to cater for 28,700 members. Our members work in diverse corporations such as small-to-medium enterprises, the ASX200 corporations, public sector organisations, to advocate executive remuneration company policy best practice.
AICD Australia
P: 1300 739 119
M: 1300 739 119
W: www.companydirectors.com.au

Keywords

executive remuneration, corporate governance, press release, company directors, Australian Institute of Company Directors, aicd, australia

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