From the AFR:
The Gillard government is set to release new laws that would require companies to claw back wrongly paid bonuses and disclose chief executives’ actual “take home” pay, at the same time as boards are shifting an increasing portion of remuneration into long-term pay.
Leading company directors warn that the next wave of executive pay reforms will further distract boards already overwhelmed at the complexity of setting executive pay and the government’s two-strikes rule, which can trigger a spill of a board.
The whining of boards should be ignored on this. Clawbacks are clearly needed to prevent the arbitraging of executive bonuses vis-a-vis their firm’s long term health. The focus on take-home pay is also welcome to my mind and increases transparency.
Executive bonus structures were a key driver of the GFC and, as arch libertarian Alan Greenspan himself confessed, one can’t always trust the alignment of executives and shareholders. It’s best therefore to not tempt management to adopt strategies where the former can freely benefit in the short term to the detriment of the latter in the long.
If it were up to me I would ban bonuses completely but clawbacks and transparency are a step forward.
