Australia's executive pay reforms labelled 'impractical'

Legal experts and consultancy firms have said proposed changes to executive pay will place an unnecessary and impractical burden on non-executive directors.

The federal government recently unveiled a package of reforms that includes the controversial "two strikes" rule, which gives shareholders the power to vote out directors if their remuneration reports are rejected.

However, the complex measures governing how firms deal with remuneration consultants are the latest to come under fire from corporate experts, the Australian reports.

The provisions state that consultants advising on the pay of key management personnel must only be engaged by non-executive directors. They can also report only to those directors or members of the remuneration committee, rather than company executives.

In their reports, companies will be required to disclose the name of the consultant, the identity of each director who signed a contract with a consultant and the name of each person who received advice from a remuneration consultant.

"There is no other type of contract that companies enter into ... that is subject to such onerous restrictions," said Tim Bednall, partner at law firm Mallesons Stephen Jaques.

The changes were also described as impractical by remuneration consultant John Egan and Johnson, Winter & Slattery partner John Keeves.