Unbalanced penalties?

Criticism from some commentators of the penalties or lack of them imposed on the non-executive directors in the Centro case raises the question whether penalties for breaching the raft of new two strikes law changes are appropriate and balanced.

The penalties determined by Middleton J in the Centro Case can be seen HERE.

The penalties for breaching the new governance provisions introduced from 1 July 2011 under the Corporations Act 2001 are HERE.

A breach of duties by a non-executive director (under s180 or s344) is a civil offence, which is potentially punishable with a fine of up to $200,000 or a disqualification order. In the circumstances of the Centro Case, Middleton J determined that the breaches committed by the non-executive directors were not serious enough to warrant any sanction.

Hedging of KMP incentives, a companys failure to approve a remuneration consultant before the consultant is engaged and the failure of a remuneration consultant to provide the required declaration about whether a recommendation has been provided free from undue influence by the KMP to whom it relates are all strict liability criminal offences, subject to fines of 60 penalty units (with penalty units currently $110, this is $6,600).

A remuneration consultant who provides a recommendation to someone other than a non-executive director is also guilty of a criminal offence subject to a fine of 60 penalty units (although this is not a strict liability offence).

Even more serious sanctions apply for KMP (or their closely related parties) who breach the proxy voting rules or who vote on the remuneration report these are criminal offences with a penalty of 200 penalty units (currently $22,000), imprisonment for 5 years, or both.

Where a company has incurred two successive no votes on the remuneration report of 25% or more, failure to hold the spill meeting within the requisite 90 days is a strict liability criminal offence for which each director is subject to a fine of 10 penalty units (currently $2,200).

Do the punishments fit the crimes?

© Guerdon Associates 2024
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