The Productivity Commission’s wide-ranging review of executive pay will look at the question of whether remuneration disclosure rules should be extended to a wider group of executives and smaller companies.
The commission, which released its issues paper on the executive pay review yesterday, has flagged a thorough examination of current rules of levels of executive pay, the way pay rates are set, and disclosure of salaries and bonuses.
Currently, listed companies and managed investment schemes with more than 100 investors are required to disclose the remuneration levels of directors and key executives. But the commission’s review, which is being led by former ACCC boss Allan Fels, wants to look at whether the 100-investor threshold should be changed.
“What is an appropriate definition of ‘executive’?” the issues paper asks.
“Does the remuneration report required under the Corporations Act and its coverage of key management personnel provide a suitable definition? Should the commission’s coverage of executives go beyond this, and if so, why?”
Other issues to be considered include whether shareholders should be given a greater say over executive pay levels via a shareholder vote, whether bonus payments are being encouraged because of favourable tax treatment, and the role of remuneration consultants.
Commissioner Robert Fitzgerald says the inquiry offered an “extraordinary opportunity to lift the lid on the way remuneration packages operate” but Fels was forced to deny that the review would be used to target executives seen as having exorbitant pay packets.
“I don’t see this as a witch-hunt on individuals, but as an attempt to look at the issues more generally,” Fels says.
Submissions are due on 29 May, with a round of public hearings to be held in June. Fels and Fitzgerald are confident a number of retired executives and executive pay consultants will come forward and appear before the inquiry.
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James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
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