Australian government hands pay power to shareholders

Shareholders in Australia could soon have the power to vote out a company's directors if they disapprove of their remuneration packages.

Draft legislation published today (December 20th) has confirmed that the government intends to implement the controversial "two strikes" rule, which will require directors to face re-election if the firm's remuneration report is rejected by at least 25 per cent of investors for two consecutive years.

David Bradbury, Australia's parliamentary secretary to the Treasury, said the measure will give shareholders more influence and enhance the "transparency, disclosure and accountability of the remuneration process".

He added: "As the owners of a company, [shareholders] deserve more say over the remuneration of company executives."

Directors and senior executives will also be banned from voting on their own compensation packages.

The government will run a consultation on the measures until January 20th 2011. It intends to introduce the bill to parliament in the first half of the year with a proposed start date of July 1st.

Critics of the two strikes system have claimed it will have a destabilising effect on companies and could be exploited by large minority shareholders or single interest groups.