The Corporations Amendment (Improving Accountability on Director and Executive Remuneration) Bill 2011 has been passed by both Houses of Parliament and is awaiting Royal Assent. (Background)

UPDATE: Date of Assent 27 June 2011 . Download Act

Proposed changes by the Opposition and the Greens were rejected by the Government. The only changes to the Bill as introduced relate to the timing of commencement of certain provisions to assist companies with AGMs in July which had to finalise notices in May or June.

The changes will now commence as follows:

• the no vacancy rule: this will apply to all public companies which set a board limit lower than the maximum specified in their Constitution from 1 July 2010;
• proxy voting: for all companies, proxy holders (including the Chair) will be required to cast all of their directed proxies on all resolutions. The new provision will apply to proxies appointed on or after 1 August 2011;
• the ‘two-strikes’ rule: for listed companies, a vote for directors to stand for re-election will be required if a board proceeds with its remuneration proposals despite the company’s remuneration report receiving a ‘no’ vote of 25 per cent or more of votes cast at two consecutive annual general meetings. The re-election resolution will be triggered where both strikes occur after 1 July 2011;
• remuneration consultants: companies that are a disclosing entity will be required to disclose details in the remuneration report relating to the use of remuneration consultants. The measures apply to advice given under contracts executed on or after commencement (1 July 2011);
• voting by key management personnel: for listed companies, KMP and their closely related parties will be prohibited from participating in the non-binding vote. In addition, KMP and their closely related parties will be prohibited from voting undirected proxies on all remuneration related resolutions. The proposed prohibition on KMP (and their closely related parties) voting in the non-binding vote applies in relation to voting on or after 1 August 2011, irrespective of whether the remuneration report concerned relates to a financial year starting before, on or after 1 August 2011. The proposed prohibition on KMP (and their closely related parties) voting undirected proxies in remuneration related resolutions applies in relation to voting on or after 1 August 2011, irrespective of whether the matter that is the subject of the resolution relates to a time before, on or after 1 August 2011;
• KMP and their closely related parties will be prohibited from hedging the KMP’s incentive remuneration. The proposed prohibition on hedging applies to entry into arrangements on or after commencement (1 July 2011), irrespective of whether the remuneration was for services rendered before, on or after 1 July 2011. UPDATE: The Corporations Amendment Regulations 2011 (No. 2) amend the Corporations Regulations 2001 to support changes made by the Corporations Amendment (Improving Accountability on Director and Executive Remuneration) Act 2011. This instrument prescribes types of arrangements that would, and would not, be considered a ‘hedge’ for the purposes of limiting the key management personnel’s exposure to risk relating to incentive remuneration. This instrument also prescribes a recommendation, or advice or information that would not be a remuneration recommendation.;
• For groups, under the new law, remuneration disclosures will only be required for the KMP of the consolidated entity. The proposed measure applies in relation to remuneration reports for financial years starting on or after commencement (1 July 2011).