Addressing the Corporate Finance Leaders' Forum, parliamentary aecretary to the treasurer Bernie Ripoll said the two strikes test gives “unprecedented power” to shareholders on issues of executive pay, adding only nine of the 108 'first strike' companies received second strikes in 2012.
“We are seeing improved engagement between boards and shareholders, and more transparency around the decisions they make on executive pay,” Mr Ripoll said.
“Looking ahead, we can expect remuneration reporting practices to evolve over the next few years, in response to the introduction of the two strikes test.”
While the government has “no plans” to change the rule, it is important not to get complacent, he said.
“The next step in ensuring Australia's executive remuneration framework remains at the forefront of international best practice is to promote more transparent disclosure of the details surrounding remuneration,” he said.
Mr Ripoll pointed to Productivity Commission recommendations that remuneration reports include a plain English summary of the company's remuneration policies, the actual levels of remuneration received by individuals named in the report, and the total company shareholdings of the individuals named in the report.
“In our response to the Commission's recommendations, the government asked the Corporations and Capital Markets Advisory Committee (CAMAC) to examine the disclosure framework around remuneration practices and consider how best to revise the requirements in the Act and supporting regulations,” he said.
Since then, the government has broadened CAMAC's terms of reference and, following the release of the CAMAC report, released a discussion paper on proposals to claw back remuneration and announced the next tranche of proposed reforms on the remuneration disclosure framework, implementing some of those recommendations.
Mr Ripoll said the government is considering submissions to the draft exposure bill, in particular in relation to proposed changes in relation to the payment of dividends.
The final legislation will build on the government's earlier reforms to ensure that Australia's executive remuneration and corporate governance framework is fair and effective, and remains at the forefront of international best practice.
