Golden handshakes are in the firing line but too is the government’s arguably populist response to
them.
SYDNEY: The legitimate termination payouts of
middle managers risk being significantly delayed
and possibly even voted down by shareholders
if the Federal Government pushes ahead with pro
posed legislation to cap executive termination pay
ments in its current form, Chartered Secretaries
Australia (CSA) has warned.
Although the objective is to target “golden
handshakes” paid to poorly performing senior ex
ecutives, CSA claimed that in its rush to act the
Government has delivered a “heavy-handed frame
work” that also captures genuine payments made
to middle managers on resignation, retirement or
redundancy.
“Imagine a long-serving worker being made
redundant – he or she may be simply a line man
ager, but it’s more than likely that once all the en
titlements are combined with their superannua
tion savings, the total termination payment would
exceed the bill’s cap of one year’s salary,” said
CSA chief executive Tim Sheehy.
“Not only would this hapless employee’s pay
out have to be approved by shareholders at the
next general meeting – which could be up to 12
months down the track – but there’s no guaran
tee the votes will go his or her way. They may
end up being denied the savings they have made
over many years of service.
”The Australasian Compliance Institute (ACI)
has also weighed into the issue of tighter control
of executive bonuses, calling for the introduction
of key performance indicators (KPIs) directly linked
to industry-benchmarked governance frameworks.
In a submission to the Productivity Commis
sion as part of the Public Inquiry into the Regula
tion of Director and Executive Remuneration, the
ACI said the KPIs would, in focusing on the gov
ernance of an organisation, also have an empha
sis on compliance and risk management. Bonus
payments would not be paid to directors and ex
ecutives if an organisation did not operate within
its agreed compliance and risk parameters.
“We believe that the balance between per
formance payments and community expectations
can be achieved through stringent KPIs that focus
on corporate governance,” said ACI CEO Martin
Tolar. “These cannot focus on minimising breach
es as the determining factor, as this could create
a culture where not all breaches are reported.”
The ACI also recommended that recognised
performance standards be mandated as a bench
marking tool to allow organisations to ensure their
compliance and risk frameworks meet industry
best practice. The standards would support ex
isting regulatory frameworks, Tolar said.
“AS/NZS 3806 comprises 12 principles grouped
into the themes of commitment, implementation,
monitoring and measurement,” he noted. “These
principles relate specifically to the ‘tone at the top’
established by an organisation’s key decision-mak
ers, and it is these principles that should be built
into the performance measures of executives.”
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