As Parliamentary Secretary to the Treasurer, the Hon David Bradbury, MP, assists the Treasurer in relation to corporate governance and taxation, competition and consumer policy and financial literacy.  In a speech on 26 November 2010, Mr Bradbury indicated that the Australian government is set to release draft legislation to implement several executive pay reforms in “coming weeks” for public consultation.

While many would agree with the overall direction of the proposals, the methods the government is following appear too narrow.  For example:

·          Reducing conflicts of interest seems to mean disclosing remuneration consultants and their fees, rather than requiring the disclosure of all pay advisers who have conflicts of interest (including management) and how the board manages these; and

·          Eliminating incentives that encourage short term, risky corporate decision making means banning hedging of unvested equity, rather than also considering amending the taxation of equity at cessation of employment and simplifying the laws limiting the granting of employee equity.

In regard to executive remuneration, Mr Bradbury said:

 

“A good example of where regulatory intervention is being pursued to curb corporate practices that are out of step with community expectations has been in the area of executive remuneration.

I have responsibility for implementing the government’s reforms announced earlier this year in response to the Productivity Commission inquiry.

In the coming weeks I hope to release draft legislation implementing these reforms for public consultation.

Against this backdrop of community concern, the Gillard Government’s executive remuneration reforms are driven by the need to give shareholders a greater say in executive remuneration decisions, improve the capacities of boards, reduce conflicts of interest, and eliminate incentives that encourage short term, risky corporate decision making.

These proposed reforms will include a “two-strikes” test to strengthen the non-binding vote, increase transparency of the use of remuneration consultants, simplify disclosures contained in the remuneration report, and prohibit the hedging of incentive remuneration.

In addition, the Government’s response includes a commitment to consult on a further proposal, not identified in the Productivity Commission report, in relation to the ‘clawing-back’ of remuneration in the event of a material misstatement in a company’s financial statements.

These reforms will give shareholders greater say in executive remuneration and will help ensure that corporate decisions in this area will become more closely aligned to community expectations.”

 

The full text of his speech can be read HERE

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