The Government has responded to the Productivity Commission’s (PC’s) final report on Australia’s director and executive remuneration framework.

The Government supports 16 of the PC’s 17 recommendations, including the “two strikes” proposal, and has decided to further strengthen several of the recommendations by expanding their scope and enforceability. See the table of responses here.

Legislation giving effect to the reforms will be introduced this year, following public consultation on an exposure draft.

The Government will also consider an additional proposal, not identified by the PC, to clawback bonuses paid to directors and executives in the event of a material misstatement in the company’s financial statements. A discussion paper will be released in coming months on the proposal to clawback bonuses paid to directors and executives in the event of a material misstatement of a company’s financial statements.

This proposal is aimed at ensuring that, to the extent that pay packets are inflated by incorrect information, that money is returned to shareholders.