Australia to curb excessive golden handshake to top bosses

18 March 2009

Australian plans to clamp down on excessive "golden handshakes" or termination payments paid to company executives.

Treasurer Wayne Swan and the minister for superannuation and corporate law senator Nick Sherry today announced reforms that include mandatory shareholder approval for golden handshakes to departing executives if it exceeds their one year's base salary.

Under the current laws, termination payments can reach up to seven times a director's total annual remuneration package before shareholder approval is required.

The government will bring reforms to through the "Corporations Act" to empower shareholders to reject such payments more easily if they are not in the interests of the company, the shareholders or the community.

At present, a director with seven years' service and an annual average remuneration package  of $2 million a year over the last three years would be entitled to a termination payment of up to $14 million without seeking shareholder approval.

The government will also introduce legislation to broaden the scope of executives whose termination or bonus payments can be subject to shareholder approval including that of executives named in the company's remuneration report. At present only directors' termination payments must be approved.