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Tag Archives: responses to GFC

Jacob Saulwick and Phillip Coorey
March 19, 2009

THE existing contracts of executives will be unaffected by the clampdown on “golden handshakes” announced by the Government yesterday as part of its campaign against greed.

After months of railing against excessive executive salaries, the Federal Government flagged laws giving shareholders more power to control the size of exit payments granted to executives.

The Treasurer, Wayne Swan, also charged the Productivity Commission with a nine-month, sweeping review of executive pay, meaning further limitations could be imposed next year, before the federal election.

Mr Swan said the community was “rightly offended” by excessive bonuses paid to some executives. He framed the measures as necessary to rebuilding confidence in the economy.

“If there isn’t a level of trust between executives and workers and the wider community we cannot build a stronger economy for the future,” Mr Swan said.

Under the changes, the Government will lower the maximum payment a company can grant a departing executive without asking shareholders.

As it stands, companies can lavish exit payments on executives of up to seven times their annual remuneration without seeking shareholder approval.

The changes to the Corporations Act will make termination payments limited to one year’s base salary – excluding share options and other instruments used to drive up pay – before requiring shareholder assent.

The Government also widened the range of executives whose termination payments need to be put to shareholders. But the laws will not be retrospective, so they will have little effect on the current crop of executives.

The announcement will bolster the case the Prime Minister, Kevin Rudd, makes at the Group of 20 summit in London on April 2, where he will urge other nations to curb executive largesse. He will also be armed with as-yet-unreleased recommendations from the Australian Prudential Regulation Authority on reducing greed-induced risk-taking in financial institutions.

Mr Rudd has been coming under pressure from his own back bench to do more than talk about executive salaries.

Several MPs have raised the matter at successive caucus meetings over the past fortnight, citing anger in their electorates.

Last year Malcolm Turnbull said shareholders should decide the entire remuneration of executives and board members, not just their severance packages.

Yesterday the Opposition Leader said a review was not needed and his proposal was “the simplest and fairest solution”.

The Minister for Corporate Law, Nick Sherry, said the “retirement gold watch” had been “replaced by a truckload of gold bullion”. He cited as examples Owen Hegarty at OZ Minerals, who received a bonus of $8.35 million, and John Alexander’s $15 million bonus from Consolidated Media – as payments that would be difficult to make under the new legislation.

The director of the corporate governance advisers Riskmetrics, Dean Paatsch, praised the initiative. “I think they’ve got the balance right. They are acting to constrain the worst excesses of compensation structures.”

Allan Fels has been appointed an associate to the Productivity Commission and will help inquire into executive pay. The Government said all options are on the table for the inquiry, which will report early next year.

The chief executive of the Australian Institute of Company Directors, John Colvin, lamented not being consulted. “Acting in haste or going too far with legislative solutions could be counter-productive,” he said.

The Business Council of Australia said excessive corporate salaries “that have occurred overseas have not been such an issue here in Australia”.

Sandy Easterbrook, director of the advisory firm CGI Glass Lewis, said boards had responded to complaints about excessive exit payments and would no longer be likely to grant them. “It is shutting the door when you don’t need to,” he said.

http://business.smh.com.au/business/rudd-takes-action-on-bosses-pay-20090318-927w.html?sssdmh=dm16.367000

Michelle Grattan | March 17, 2009 – 10:35AM

The Senate is likely to widen the net for small businesses exempted from the unfair-dismissal requirements in the Government’s Fair Work Bill, as the Opposition sharpens its attack on the bill.

Workplace Relations Minister Julia Gillard met Family First senator Steve Fielding and independent Nick Xenophon yesterday, but sticking points remained with each.

Both favour exempting more small businesses from unfair-dismissal procedures. Senator Fielding wants to exclude those with the equivalent of fewer than 20 full-time workers; Senator Xenophon would accept a head count of fewer than 20. The Government is persisting with a head count of fewer than 15.

The Opposition wants fewer than 25 full-time equivalents, well below WorkChoices’ 100, but would support the cross-benchers’ position when its own amendment failed.

The Government signalled last night that it is willing to give ground on unions’ right of entry to workplaces but wouldn’t go as far as Senator Fielding’s demand to exempt all small firms.

With its final position on the bill still to be decided but apparently toughening, the shadow cabinet will put extra amendments, described as technical, to today’s Coalition parties meeting.

In Parliament, the Opposition lashed out at Labor’s “job-destroying industrial relations changes”, while the Government claimed the Coalition still backed WorkChoices.

Challenging the Opposition to state its current position on WorkChoices, Prime Minister Kevin Rudd said: “I thought their position was that WorkChoices was dead. It is part dead, is it?”

Mr Rudd pointed to the “very pathetic spectacle” of Malcolm Turnbull being reined in not only on industrial relations and climate change but “right across the board”. Coalition policy development was “paralysed by the opportunism which arises from its own internal leadership conflict”.