Australia’s new “two strikes” law giving shareholders more power to curb excessive executive pay packets, promises to shake up some businesses.
Homewares company GUD Holdings has already been hit with a protest vote from 42% of shareholders over the company’s remuneration report, under the new legislation introduced in July.
Under the new amendment to the Australian Corporations Act, if 25% or more of votes cast at two consecutive AGMs oppose the adoption of a remuneration report, then the company must formally respond by asking all board members except the managing director to stand for re-election within 90 days.
In addition, key management personnel whose remuneration is disclosed in the remuneration report are excluded from voting, ensuring those with an obvious interest in the outcome cannot vote.
So businesses have been put on notice.
There are few more controversial issues than executive pay.
Here in Australia, Qantas chief executive Alan Joyce found himself in the firing line for his large pay increase despite a damaging industrial dispute.
Last week, the Australian Shareholders Association indicated it would oppose the remuneration package of Wesfarmers chief Richard Goyder and financial officer Terry Bowen at the company’s AGM in November.
Since 2005, Australian shareholders have had the right to vote on the remuneration report of their companies at an AGM.