Corporations Amendment (Improving Accountability on Director and Executive Remuneration) Bill 2011
The above Bill was introduced by Federal Parliament into the House of Representatives on 23 February 2011. To date it has not been passed by the House.
The Bill, if enacted in its present form will have significant effects for listed public companies.
Since 2004 listed public companies have been required at their annual general meetings to put a resolution that the remuneration report be adopted. The vote on such resolution is however advisory only and does not bind the directors of the company.
The Bill provides that if at any two consecutive AGM’s at least 25% of the votes cast on a remuneration resolution were against adoption of the report then the directors must put to the vote a resolution (spill resolution) that:
(a) Another meeting of the company’s members be held within 90 days; and
(b) All of the company’s directors who were directors when the later AGM was held (other than the managing director) cease to hold office immediately before the end of the spill meeting; and
(c) At the spill meeting to pass resolutions to appoint directors to fill the vacated offices.
- any votes cast on a remuneration resolution by Key Management Personnel or their closely related parties will not be counted on the resolution.
- If the Company does not hold the spill meeting within 90 days after the spill resolution was passed, each person who is a director of the company at the end of those 90 days commits an offence.
- If resolutions at the spill meeting result in less than three directors being appointed the nominees receiving the next highest number of votes are appointed.
- If a director who ceases to hold office immediately before the end of the spill meeting is appointed as a director by resolution passed at the spill meeting, his or her term of office runs as if the cessation of appointment had not happened.
- If at least 25% of votes are cast against the remuneration report at any AGM the directors must also give an explanation of the boards proposed action in response or if the board does not propose any action, the boards reason for inaction and if a remuneration consultant made a remuneration recommendation the company must provide a number of details in relation to the consultant and the advice given.
In summary, the Bill also provides as follows:
amends the Corporations Act and includes a number of new definitions including Key Management Personnel which is given the same meaning as in the Accounting Standards and Remuneration Consultant, Remuneration Recommendation etc.
applies to Key Management Personnel for disclosing entities that are companies which are in most instances listed public companies.
proscribes hedging of remuneration of Key Management Personnel being remuneration that has not vested in such personnel or is subject to a holding lock. That includes remuneration which is payable at a future date.
requires either the Board to approve the appointment of Remuneration consultants or the Remuneration Committee of the Board to do so.
requires Remuneration Consultants to include with a recommendation a declaration that it is made free from undue influence by the member or members of the Key Management Personnel to whom the recommendation relates.
provides that where the directors have power to limit the number of directors on the board the board cannot exercise such power unless it submits it to a resolution of members. Again there are certain restrictions as to which members can vote on such a resolution.
Joe Polkinghorne
Special Counsel
T: +61 2 9390 8335