Cap on executive pay 'not practical' - 4 Jan 2010
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Cap on executive pay 'not practical'
By Emily Bourke for AM
Posted
Updated
The average annual salary for Australia's top 20 executives is $7.2 million. (AFP: Greg Wood, file photo)
The Productivity Commission has called for greater
transparency in the formulation of executive pay packages, but has
stopped short of recommending a cap on salaries.
A nine-month inquiry, led by former ACCC boss Alan Fels, has found
the average annual salary for Australia's top 20 executives is $7.2
million.
That amount is in line with continental Europe, but less than in the United States and Britain.
The report found Australian executive pay has grown since it became linked to company performance over the past decade.
But the report says neither a cap nor a binding shareholder vote would be a practical solution for excessive pay.
Instead, it has suggested salaries be set by independent
remuneration committees, and the use of remuneration consultants be
overhauled.
It has also called for greater pay disclosure and stronger
consequences for boards that do not respond to shareholders' concerns
about pay levels.
The Federal Government will respond to the report in the coming
months, but Corporate Law Minister Chris Bowen says the recommendations
are in the right direction.
"I think what they'll do is really focus the mind of directors on the views of shareholders," Mr Bowen said.
"What this report has confirmed is what has been my view all along,
that a blunt salary cap would never work and would be inappropriate for
the government to impose.
"But you can ensure, through the Corporations Act, greater accountability, more transparency, less conflicts of
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