Senator Nick Sherry, Minister for Superannuation and Corporate Law, has released an exposure draft of the Corporations Amendment (Improving Accountability on Termination Payments) Bill 2009 and Regulations. The Bill will change the regulatory framework relating to the payment of termination benefits to company directors and executives currently set out in Sections 200F and 200G of the Corporations Act.

If passed, the Bill will:

• lower the threshold at which shareholder approval is required for a termination payment from seven times an annual remuneration package to one times average annual base pay;
• expand the number of company officers for which approval is required from directors to also include senior executives and key management personnel;
• broaden the definition of what constitutes a "benefit", including a new Regulation-making power to deem new forms of payment that seek to avoid the law as a termination benefit;
• clarify the definition of a termination benefit and expand it to include the accelerated or automatic vesting of options and payments in lieu of notice;  
• require immediate repayment of unauthorised termination benefits. Any unpaid benefits will continue to be held on trust for the company;
• impose higher penalties for breaches of sections 200B, 200C and 200D, with potential fines for individuals to be increased to $19,800, up from $2,750, together with the option of six months imprisonment, and for corporations to be increased to $99,000, up from $16,500 ; and
• a mechanism for shareholders to assess golden handshakes in the context of the recipient's actual performance by requiring shareholder votes on termination benefits to take place at a future annual general meeting following an executive's departure and a ban on the calling of extraordinary general meetings that are only to undertake such an approval vote.

The Bill will not alter contractual arrangements entered into before the Bill becoming law, including defined benefit superannuation arrangements, and excludes statutory superannuation payments from the calculation of "termination benefits".

The Rudd Government has also asked the Productivity Commission (PC) to undertake an inquiry into executive remuneration. The PC inquiry will take the new laws into account as part of its inquiry into Australia's executive remuneration framework.

The Bill, which will be introduced into Parliament during the Winter sittings, will be open for public consultation for a four-week exposure period ending on 2 June, 2009