Shareholders to get bigger say on CEO’s bonuses

The Federal government is planning to give shareholders a bigger say in clawing back bonuses and golden handshakes paid to company executives who haven’t earned them.

David Bradbury, the Parliamentary Secretary to the Treasurer, explained the plan today.

He said the government will make changes to the Corporations Act.

These would require listed companies to tell shareholders of the steps they had taken, to recover payments made where there had  been ” a material misstatement….in relation to the company’s financial statements.”

“In this situation, if the company has not clawed back any remuneration, the board will be required to provide a detailed explanation to their shareholders,” Mr Bradbury said.

He said this could be called an  ‘if not, why not’ requirement.

“These reforms put the onus on listed companies to make sure they have provisions to clawback bonuses and other pay from executives if there has been a material misstatement of a company’s financial statements,” Mr Bradbury said.

“If they don’t, they run the risk of shareholders recording a ‘strike’ against them at their annual general meeting when they vote on the remuneration report.”

Shareholders might ultimately vote to spill the board and force fresh elections of directors.

Mr Bradbury said many listed Australian companies already wrote clawback provisions into the contracts they offered potential executives.

He said the proposed reforms would give shareholders a say about the power of those provisions.