New reporting requirements for executive remuneration arrangements
The Government reminded us late in February that its reforms to executive remuneration and the reporting thereof is a continuing process and we can expect more in terms of legislative change as the year progresses.
As part of this Government’s ongoing reform of executive remuneration, it is anticipated that amendments will be made to the Corporations Act 2001 to require listed companies to disclose to shareholders through the remuneration report the steps they have taken to clawback bonuses and other remuneration where a material misstatement has occurred in relation to the company’s financial statements.
In such a situation, if the company has not clawed back any remuneration, the board will be required to provide a detailed explanation to their shareholders. If shareholders are unhappy with the company’s actions, they would be able to use their powers under the two-strikes rule to vote down the remuneration report and potentially spill the board.
In response to CAMAC’s 2011 report on executive remuneration, the Government is also looking for improvements in remuneration reports, by requiring more transparent disclosure of termination payments or ‘golden handshake’ payments. According to the Assistant Treasurer, David Bradbury  “Unnecessary disclosure requirements will be removed to simplify remuneration reports, and clearer categorisation of pay will be introduced to better enable shareholders to understand the company’s remuneration arrangements.
Other proposed reforms to the executive remuneration framework announced include:
- relieving certain unlisted entities from the obligation to prepare a remuneration report, which will significantly reduce the regulatory burden on companies that are not subject to the ‘two-strikes’ mechanism; and
- inserting disclosure requirements relating to related party transactions into the Corporations Regulations, as these disclosure requirements will be removed from the accounting standards from 1 July 2013.
Minister Bradbury’s press release also provided a summary of Government response to CAMAC’s 2011 report on executive remuneration.
Egan Associates will keep you informed of the progress of these reforms.
 At the time of this press release David Bradbury was Parliamentary Secretary to the Treasurer, he has subsequently been appointed Assistant Treasurer.