Don’t legislate on executive remuneration, says CSA
Proposed legislation to simplify the executive remuneration structure in public companies is neither feasible nor desirable, according to a submission to the Corporations and Markets Advisory Committee (CAMAC) from Chartered Secretaries Australia (CSA).
The proposals are aimed at making executive remuneration more transparent and easier to understand for shareholders, reducing inappropriate payouts and restoring public confidence in the corporate sector, according to the Productivity Commission.
CSA president Peter Turnbull said the CSA disagreed with the assumption that making incentives easier to understand for shareholders was a good enough reason to create the legislation.
“The incentive components of remuneration packages should take into consideration the individual circumstances of the company rather than legislation determining the structure of the remuneration frameworks,” he said.
“A centralised, regulated approach for setting remuneration will deprive companies of the ability to respond most effectively to the needs of the day, and almost certainly will drive inefficiencies and unwanted outcomes.”
It may also impair the ability of larger companies to attract and retain the best international talent, he said.
Turnbull said the directors should continue to determine executive remuneration and be accountable to shareholders for their decisions, which should be transparent.
According to the CSA’s recommendation, reporting on executive remuneration could be simplified by removing the requirement that directors report to shareholders on remuneration using defined terms from accounting standards; by mandating that reporting include all actual pay received during the year from all sources; and mandating the separate reporting of deferred payments to state the maximum number of securities that may be received.
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