The BCA has welcomed the federal government’s adoption of most of the recommendations put forward by the Productivity Commission in its report on executive remuneration.
BCA President Graham Bradley said the Productivity Commission had based its recommendations on thorough consultation. “Importantly, the commission – and now the government – have recognised the central role of boards in determining executive remuneration.”
“Overall, the commission’s recommendations and the government’s response provide a reasonably balanced approach to what has been a sensitive issue for the community,” he said.
“There are, however, two recommendations that the BCA considers lack sufficient clarity and have the potential to impose unnecessary and unwarranted restrictions on the flexibility of boards. These are the recommendations around the ‘two strikes’ policy and the ‘no vacancy’ rule.
“The government has decided to support these measures and we will seek to work constructively with them to ensure that changes in these areas will minimise the likelihood of unintended consequences.
“The government has gone beyond the Productivity Commission in recommending an additional reform to claw back bonuses where financial information is materially misstated. While we acknowledge the government’s intent, the consultation process will be critical in developing options.
“We continue to maintain that Australian listed companies needed the flexibility to attract and retain skilled and experienced executives in a competitive global market.
“Our hope is that these new measures will succeed in enhancing governance and accountability within corporate Australia without reducing the flexibility needed for our businesses to remain competitive on the world stage.
“The handling of concerns around executive remuneration and associated governance issues by referring the matter to the Productivity Commission was a sensible approach. The government has now responded in a generally sound way and for the most part its proposals should be workable,” he said.