Business attacks remuneration proposal
By Ruth Williams | smh.com.au | 08 October
The so-called "two strikes" plan that aims to force boards to reform executive pay structures could destabilise companies and could "disempower" shareholders, the Business Council has warned.
But the body behind the plan, the Productivity Commission, defended the proposal, along with what it dubbed a "powerful package" of suggested reforms to executive pay set out in its 400-page draft report released last week.
Speaking at a lunch in Melbourne yesterday, Productivity Commission chairman, Gary Banks, acknowledged the two strikes rule had "excited more controversy" than the report's 14 other recommendations.
Under the plan, if a company's remuneration report attracts a "no" vote of more than 25 per cent the first year, and an as-yet-unspecified substantial vote the second year, all directors must stand for re-election.
Graham Bradley, a Business Council board member and the chairman of HSBC Australia, told the lunch that the "two strikes" plan was a "bridge too far" that should, and would, be strongly resisted.
"I think it puts inappropriate power in the hands of minority shareholders to destabilise boards, to incur costs which all shareholders will bear and to distract boards from what I consider to be, in general, much more important tasks than the minutiae of remuneration," Mr Bradley said.
But the Productivity Commission's associate commissioner, Allan Fels, said that similar concerns had been raised about giving shareholders a non-binding vote on remuneration – concerns that proved unfounded.
"The shareholder destabilisation story was told when non-binding votes were introduced, and they destabilised nothing," he told BusinessDay.
"We also think that having two strikes, two votes, is a very strong safeguard. It's only to trigger an election."
First published by Smh.com.au on October 08 2009
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