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IN BRIEF - Executive Remuneration & Employee Share Schemes

​The Federal Government's proposed legislation capping termination payments for directors and executives at 1x base salary has been passed by the House of Representatives and recommended by the Senate Economic Committee with only one change. The Bill is being debated in the Senate this week, and could become law within days. 

The Bill will have a material impact on remuneration structures for a broad range of executives, which is likely to be inconsistent with APRA's recommendations for greater performance- and risk-based remuneration.  The Bill is also likely to have unfortunate and inconsistent impacts on existing employment contracts (even with prior shareholder approval), superannuation payments, restraints of trade, and damages settlements. 

APRA has announced a second round of consultation on remuneration principles for regulated financial sector companies, with  submissions due by 2 October and new standards to be issued in November, effective from 1 April 2010.

Meanwhile, the Productivity Commission is considering whether to give shareholders of public companies a greater say on executive remuneration than is presently the case with non-binding votes on the annual remuneration report. The Commission's draft report is due out later this month.

There have also been further developments on amendments to the Government's unpopular taxation reforms of Employee Share Schemes (ESS), announced in the Federal Budget.

The Government released an exposure draft Bill last month seeking submissions until 31 August on proposed amendments in a range of areas, including the deferred taxing point for shares and rights, salary sacrifice based tax deferral and restrictions on the ability to obtain a refund for out-of-the-money options.

The Senate Economics Committee has reviewed the Bill and recommended that it be deferred until after the Productivity Commission review of executive remuneration, the Henry Tax review, and a Board of Taxation review have been completed later this year. (The Board of Taxation recently announced a review of aspects of employee share schemes and called for submissions by 9 October.) 

For more detailed analysis of ESS, see Mallesons publications here.

 

Author(s)

  • Tim Bednall
    Managing Partner, M&A and Tax | Sydney
    T: +61 2 9296 2922
    M: +61 414 504 922
    Email | Profile
 

 Local contact(s)

 
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