On 14 December 2012, the Australian Government released an exposure draft Bill, the Corporations Legislation Amendment (Remuneration Disclosures and Other Measures) Bill 2012 (Bill), which proposes amendments to the Corporations Act 2001 (Cth) (Corporations Act). The proposed amendments impose additional obligations on listed companies' disclosure requirements around executive remuneration. The proposed obligations extend to executive salaries, bonuses, termination payments as well as payments relating to the settlement of any disputes arising out of the termination of employment.
If the Bill were to be enacted and form part of the Corporations Act, listed companies will face an increase in their existing obligations in the following ways:
- The requirement that companies whose financial statements have been materially misstated to either disclose any overpaid remuneration to Key Management Personnel (KMP) will be 'clawed back'; or if no reduction, repayment or alteration of overpaid remuneration is made, an explanation of why not will be required. This builds on the current disclosure obligations in a director's report in relation to KMP remuneration.
- It will be a requirement to provide a general description of a company's remuneration governance framework, which is not an existing obligation.
- There will be an obligation to disclose the number of lapsed options and the year in which lapsed options were granted, rather than just the value of lapsed options (as is the current requirement).
- There will be an obligation to disclose termination or 'golden handshake' payments, rather than just payments made pursuant to a contract.
- There will be an obligation to disclose present pay, future pay and past pay for each KMP. This expands on the current 'prescribed details' in relation to the remuneration of KMPs.
The Bill is the second tranche of reforms since 2010, designed to build on the additional powers shareholders have over the pay of company directors and executives.
As this is an exposure draft Bill, interested persons are able to make submissions on the proposed amendments. Submissions close on 15 March 2012 and can be made via the Treasury website.
DLA Piper can provide a copy of the current Corporations Act, supplemented with the proposed changes set out in the exposure draft upon request.
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