Australia: the Corporations Amendment (Improving Accountability on Termination Payments) Bill 2009 - progress report

The Corporations Amendment (Improving Accountability on Termination Payments) Bill 2009 will require shareholder approval of directors' termination payments which exceed one year's base pay. At present it is possible for a director to receive a termination payment equivalent to seven years' base pay without shareholder approval. 

The Bill was introduced in the House of Representatives on 24 June 2009 and subsequently referred to the Senate Economics Legislation Committee for inquiry and report. On 27 July the inquiry presented its interim report and stated that it required more time to complete it final report, which is now likely to be published during the first half of September. Meanwhile, the Australian Parliament's Department of Parliamentary Services has provided a useful digest of the Bill here. Submissions to the Legislation Committee's inquiry have also been published: see here. 

Australia: director and senior executive termination payments

A draft of the Corporations Amendment (Improving Accountability on Termination Payments) Bill 2009 has been published: see here. In the accompanying explanatory memorandum, the purpose of the Bill is set out as follows:

The current regulatory framework allows for termination benefits to reach up to seven times a director’s total annual remuneration package before shareholder approval is required. Additionally, only company directors’ termination benefits are subject to shareholder approval.

The Bill introduces a significantly lower threshold at which termination payments benefits must be approved by shareholders. Under the new arrangements, termination benefits for company directors and executives exceeding one year’s average base salary are subject to shareholder approval. In addition, the range of personnel whose termination benefits can be subject to shareholder approval is expanded from directors to also include senior executives and key management personnel. The Bill also clarifies the types of benefits that are subject to shareholder approval"