Guerdon Associates was invited by the Australian Senate Standing Committee on Economics to make a submission on the amended regulations pertaining to executive termination pay.

In summary our submission suggested that:

• The Bill does not complement or recognise the role of existing corporate governance frameworks

• The unintended consequences of the Bill could include significant increases in base salaries for those covered by the bill

• Excess termination payments above the defined limit should remain subject to shareholder approval, but should be applied to directors only, as at present

• We agree that the elements of termination pay should be clearly defined in the Act and should exclude unvested performance pay and deferred incentives that have been previously earned. Accrued superannuation entitlements should also be excluded, but additional payments into superannuation co-incident with the termination should be prohibited

• The threshold payment level above which shareholder approval is required should be set at three times base salary plus bonus (using an average based on the previous three years’ experience)

• An estimate of full year base salary should be used where the service period is less than one year and it should not be pro-rated

The full text of our submission can be read on the parliamentary web site HERE

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