The legitimate termination payouts of middle managers risk being significantly delayed and possibly even voted down by shareholders if the Government pushes ahead with proposed legislation to cap executive termination payments in its current form, Chartered Secretaries Australia (CSA) said today.

In its rush to act, the government has delivered a heavy-handed framework that also captures genuine payments made to middle managers on resignation, retirement or redundancy, Tim Sheehy, CSA’s chief executive said today.  

“The definition of a termination payment is currently so broad that legitimate entitlements like accrued annual leave, long service leave, and bona fide redundancy payments, as well as salary sacrificed superannuation contributions, are also caught,” said Sheehy.  

CSA calls into question the possibility that the Bill will extend beyond key executives of the listed parent company, to management personnel of its subsidiary companies. It claims this would make the legislation impractical and unworkable, with no public benefit to shareholders as many large listed companies have hundreds of unlisted subsidiaries in Australia. 

“BHP Billiton has over 200 Australian subsidiaries, the Commonwealth Bank has over 500 and Rio Tinto approximately 300. It would be an administrative and compliance nightmare to have to submit the termination payments of general managers of these entities to a shareholder vote, particularly when these managers are often not on the same scale of seniority as the parent company and their potential termination payments would not generally be at a level to cause concern to shareholders or the broader community. This is another major oversight,” said Sheehy.