find the latest legal job
Corporate Counsel and Company Secretary
Category: Generalists - In House | Location: Newcastle, Maitland & Hunter NSW
· Highly-respected, innovative and entrepreneurial Not-for-Profit · Competency based Board
View details
Chief Counsel and Company Secretary
Category: Generalists - In House | Location: Newcastle, Maitland & Hunter NSW
· Dynamic, high growth organisation · ASX listed market leader
View details
In-house Projects Lawyer | Renewables / Solar | 2-5 Years PQE
Category: Generalists - In House | Location: All Australia
· Help design the future · NASDAQ Listed
View details
Insurance Lawyer (3-5 PAE)
Category: Insurance and Superannuation Law | Location: Brisbane CBD & Inner Suburbs Brisbane QLD
· Dynamic organisation ·
View details
Legal Counsel
Category: Corporate and Commercial Law | Location: North Sydney NSW 2060
· 18 month fixed term contract · 3-5 years PQE with TMT exposure
View details
Goodbye Golden Boys and (Girls)

Goodbye Golden Boys and (Girls)

Whether or not you agree with the Government's arguably populist policy rationale, hefty legal question-marks hang over the new golden handshake legislation, writes Laura MacIntyre. The former…

Whether or not you agree with the Government's arguably populist policy rationale, hefty legal question-marks hang over the new golden handshake legislation, writes Laura MacIntyre.

The former CEO of Pacific Brands, Paul Moore, received a $3.4 million "retirement payment" just as the company announced2000 local job cuts. Consolidated Media Holdings Limited (PBL) CEO John Alexander received $15 million dollars when he retired as CEO in September 2007. The figure was equivalent to 468 per cent of his annual salary.

Moore and Alexander were among those executives "named and shamed" by Federal Treasurer Wayne Swan at the press conference announcing the bill aimed at stamping out the practice of "golden handshakes". The Treasurer also announced an inquiry by the productivity commission into executive remuneration, headed by former ACCC chairman, Professor Allan Fels.

Lawyers are still awaiting clarification on key areas of the draft legislation, including the timing of contract formation, the status of superannuation payments, and its interaction with taxation law, especially as it relates to incentive schemes such as company share options.

Aside from the technical legal issues, the question remains -- will the new laws simply force executive remuneration practices underground, making the process even less transparent?

Where there's a will, there's a way

Freehills' employee relations partner Justine Turnbull says the verdict is already in, with clients implementing workarounds to avoid the golden handshake restrictions.

"It's not for the government to set limits, and it just becomes unnecessarily restrictive and results in perverse outcomes because people will find their way around these provisions," she says. "Some of the ways around the proposal that we are seeing are sign-on payments and bigger base salaries.

"Remuneration is a matter for boards, and community concern and interest about executive remuneration is irrelevant. If people in the community are shareholders then they have avenues they can pursue to get to directors and their decision making."

Shareholder empowerment

The proposed amendments to section 200F of the Corporations Act 2001 will put a cap on termination payouts, reducing the trigger threshold for shareholder approval from seven times the annual remuneration to one year's average base salary.

Under the proposed legislation, reaching a termination payment that exceeds the cap will trigger the new shareholder voting provisions. However, the shareholder meeting cannot be called for the "sole or dominant purpose" of passing the approval resolution.

Mallesons Stephen Jaques partner Diana Nicholson says this is an inefficient outcome for both exiting executives and their former employers. "Basically, that says you've got to wait for an annual general meeting (AGM), and I don't see how that's tenable, because people's rights will be triggered on termination," she explains. "What if the AGM was 10 or 11 months away?"

Corporate governance

Australasian Compliance Institute CEO Martin Tolar believes it is paramount for companies to improve their own corporate accountability processes. The ACI submission to the Productivity Commission recommends an approach that ties executive bonus payments to effective corporate governance.

"It's a global market place, and how much people are being paid is a bit of a flat issue that will play out in the electorate. The most important thing really is not the dollar amount, but rather what behaviours those dollar amounts actually reward," says Tolar.

"That's where we've made suggestions around the need to actually include KPIs around risk management, compliance and governance.

Jumping the gun?

Freehills' Turnbull says the Government has jumped the gun by legislating before the Productivity Commission returns its findings. Turnbull also points out that the situation in Australia has not reached the disproportionate level of US executive payouts.

"We haven't had the excesses here that we've had in other jurisdictions. We haven't had the other general excessive executive remuneration and risk-taking behaviour that's been seen in other jurisdictions and nor have we had the government bail-out.".

The Bill, which will be introduced into Parliament during the Winter sittings, will be open for public consultation for a four-week exposure period ending on 2 June 2009.

Like this story? Read more:

QLS condemns actions of disgraced lawyer as ‘stain on the profession’

NSW proposes big justice reforms to target risk of reoffending

The legal budget breakdown 2017

Goodbye Golden Boys and (Girls)
lawyersweekly logo
Promoted content
Recommended by Spike Native Network
more from lawyers weekly
LCA president Fiona McLeod SC
Aug 17 2017
Where social fault lines meet the justice gap in Aus
After just returning from a tour of the Northern Territory, LCA president Fiona McLeod SC speaks wit...
Marriage equality flag
Aug 17 2017
ALHR backs High Court challenge to marriage equality postal vote
Australian Lawyers for Human Rights (ALHR) has voiced its support for a constitutional challenge to ...
Give advice
Aug 17 2017
A-G issues advice on judiciary’s public presence
Commonwealth Attorney-General George Brandis QC has offered his advice on the public presence of jud...
APPOINTMENTS
Allens managing partner Richard Spurio, image courtesy Allens' website
Jun 21 2017
Promo season at Allens
A group of lawyers at Allens have received promotions across its PNG and Australian offices. ...
May 11 2017
Partner exits for in-house role
A Victorian lawyer has left the partnership of a national firm to start a new gig with state governm...
Esteban Gomez
May 11 2017
National firm recruits ‘major asset’
A national law firm has announced it has appointed a new corporate partner who brings over 15 years'...
opinion
Nicole Rich
May 16 2017
Access to justice for young transgender Australians
Reform is looming for the process that young transgender Australians and their families must current...
Geoff Roberson
May 11 2017
The lighter side of the law: when law and comedy collide
On the face of it, there doesn’t seem to be much that is amusing about the law, writes Geoff Rober...
Help
May 10 2017
Advocate’s immunity – without fear or without favour but not both
On 29 March 2017, the High Court handed down its decision in David Kendirjian v Eugene Lepore & ...