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Executive Remuneration in Australia

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  • Productivity Commission
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    Abstract

    A catalyst for this inquiry was concern that executive pay had got out of hand. This perception was fuelled by practices in financial institutions abroad that were seen as a key contributor to the global financial crisis. Further, while local shareholder value plummeted in 2008 as a result of that imported crisis — with some companies and sectors being propped up by taxpayers — executive pay seemed to emerge unscathed, crystallising a view that executives were being rewarded for failure (after having been rewarded for success). This has come on top of longstanding community discomfort about the widening gap between the remuneration of executives and other employees, as well as some large termination payments with perceived lack of justification. Public opinion polling over the years consistently shows that most respondents believe executives to be overpaid. But polls also reveal limited awareness of the drivers of executive pay and wealth creation. Accordingly, this inquiry was tasked with ascertaining what has actually happened to executive pay in Australia’s publicly-listed companies, as well as identifying what can and should be done about it. The appropriate test for any policy intervention is that it promotes community wellbeing: hence the Commission has explored the likely drivers of executive pay and the economic implications of current pay levels and structures. Ultimately, judgment must be exercised, particularly in relation to the magnitude of identified problems and the case for intervention, taking into account both the potential costs and benefits. The Commission's final recommendations constitute an integrated package of reforms that would strengthen board decision-making on executive remuneration, by reducing board 'clubbiness', removing potential for conflicts of interest and enhancing accountability for pay outcomes. Shareholders would get better information and would have more 'say on pay'.

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    File URL: http://www.pc.gov.au/__data/assets/pdf_file/0008/93590/executive-remuneration-report.pdf
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    File URL: http://www.pc.gov.au/projects/inquiry/executive-remuneration/report
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    Bibliographic Info

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    This book is provided by Productivity Commission, Government of Australia in its series Inquiry Reports with number 49 and published in 2009.

    ISBN: 978-1-74037-300-5
    Handle: RePEc:ris:prodir:49

    Note: 520 pages
    Contact details of provider:
    Postal: Level 28, 35 Collins St, Melbourne Victoria 3000
    Phone: 61 3 9653 2100
    Fax: 61 3 9653 2199
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    Web page: http://www.pc.gov.au/
    More information through EDIRC

    Related research

    Keywords: executive remuneration; termination benefits; remuneration packages; equity-based payments;

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